In re Moore
| Decision Date | 09 May 2022 |
| Docket Number | Case No. 20-32587 |
| Parties | IN RE: John MOORE & Janet Martin, Debtors. |
| Court | United States Bankruptcy Courts. Sixth Circuit. U.S. Bankruptcy Court — Southern District of Ohio |
Eric A. Stamps, Stamps & Stamps, Dayton, OH, for Debtors.
DECISION GRANTING DEBTOR JOHN MOORE'S CROSS-MOTION FOR SUMMARY JUDGMENT (DOC. 71) AND DENYING CHAPTER 7 TRUSTEE'S MOTION FOR SUMMARY JUDGMENT (DOC. 69)
John Moore ("Moore"), 68, filed a joint petition under Chapter 7 of the Bankruptcy Code together with his wife, Janet Martin ("Martin"). Doc. 64 at 1. Paul Spaeth ("Trustee") was appointed as the Chapter 7 Trustee in the case. In his initial Schedule C, Moore claimed an exemption in a self-directed individual retirement account (the "IRA") under Ohio Revised Code § 2329.66(A)(10)(b). Doc. 1 at 18. The Trustee objected to Moore's claimed exemption on the basis that the account lost its tax-qualified IRA status when Moore engaged in a number of prohibited transactions with disqualified persons in violation of ERISA and IRS rules. Doc. 25 at 2-3. Moore, through his attorney, filed a response and reiterated his claim of an exemption in the account. Doc. 44 at 1. After completing discovery, the parties filed joint stipulations and exhibits and, contemporaneously, the Trustee filed his motion for summary judgment. Doc. 64; Doc. 69. Moore filed a response and cross-motion for summary judgement to which the Trustee filed a reply brief. Docs. 71, 72. The court subsequently held a post-briefing status conference and allowed the parties to file supplemental briefs clarifying the applicable subsection of the Ohio exemption statute. Docs. 74, 75. Both parties submitted such briefs. Docs. 77, 81. In addition, Moore amended his Schedule C to claim exemptions in the IRA under Ohio Revised Code § 2329.66(A)(10)(c) and (e) in addition to (b). Docs. 79, ¶ 2. The Trustee objected to the claimed exemptions, and Moore filed a response. Docs. 80, 82.
On April 14, 2016, after attending a promotional conference in Las Vegas, Moore opened a self-directed IRA under the custodianship of American Estate and Trust LCC (the "Custodian") and administered by Accuplan. Doc. 64, ¶ 10, 11. He planned to use the IRA as a vehicle for investments in non-traditional assets. Id. at ¶ 11. Initially, Moore funded the IRA with funds rolled over from other existing IRAs he owned. Id. at ¶ 18. Moore exercised discretionary authority over the IRA's investment and asset liquidation activity, making all investment decisions personally and providing instructions to the Custodian. Id . at ¶ 12. In 2016 Moore directed the Custodian to invest IRA funds in vacant real estate properties located in Florida. Id. at ¶ 30. The IRA funds were also invested in an options trading account held by R.J. O'Brien, a corporate entity. Id . at ¶ 19. Option IQ, another entity, acted as the introducing broker. Id. All proceeds from the invested funds were deposited in the IRA. Id. Nothing in the record suggests that Moore had any relationship to either company.
Moore also holds an ownership interest in Louisiana Oil and Gas LLC ("Louisiana Oil"), incorporated in Utah. Id. at ¶ 6. The company's March 1, 2017 Certificate of Organization listed Moore as the sole owner of the company. Id . Shortly thereafter, on March 3, 2017, Moore added Martin as a co-owner but retained fifty percent or more of Louisiana Oil's shares. Id. Until 2018, Louisiana Oil held a twenty percent ownership interest, purchased for approximately $30,000, in the Harry O'Neal oil well located in Mississippi and received regular revenue dividends from oil sales. Id. at ¶¶ 7,8. Louisiana Oil in turn made regular transfers to Moore. Id. at ¶ 8. The IRA Account Terms and Conditions ("Terms") included an explanation of statutorily prohibited transactions between the account and disqualified persons under ERISA and IRS rules. Id . at ¶ 3, The parties agree that Moore, Martin, and Louisiana Oil were disqualified persons under the ERISA and IRS rules. Id. at ¶¶ 14-16.
On February 15, 2017 Moore transferred $40,000 from the IRA to his personal bank account at Wright-Patt Credit Union. Id. at ¶ 22; Joint Ex. E. Subsequently, on March 6, 2017, he transferred $135,000, including the earlier transferred $40,000, from his personal account to an account held by Louisiana Oil. Id . at ¶ 23; Joint Ex. E; Joint Ex. F. On August 8, 2017 Louisiana Oil loaned $40,000 to a Mr. Steven Ford. Id. at ¶ 24; Joint. Ex. G. Later in 2017, Moore transferred an additional $54,000 from the IRA to his personal bank account. Id. at ¶ 25; Joint Ex. C; Joint Ex. H. The Form 1099-R issued by the Custodian to Moore for the 2017 tax year showed a total of $94,000 in gross distributions from the IRA to Moore. Id. at ¶ 25; Joint Ex. I. The custodian classified using distribution code "7" on the tax form, the code for regular distributions. Id. (Joint Ex. I).
In January 2018 Moore loaned approximately $28,059.15 to "PPU," the oil well operator for the Harry O'Neal well in which Louisiana Oil held an ownership stake, from his personal account. Id. at ¶ 28. The loans were used to pay Louisiana Oil's share of the expenditure obligations and treated as investment credits. Id at ¶ 29. In May and June of 2021 the IRA liquidated the Florida properties at Moore's direction and deposited the proceeds into the IRA. Id. at ¶ 31. As of August 1, 2021, the IRA's value equaled $96,256.42. Id. at ¶ 32; Joint Ex. D.
This court exercises jurisdiction pursuant to 28 U.S.C. § 1334(b) and the standing order of reference in the District Court for the Southern District of Ohio, Amended General Order 05-02. This is a core proceeding pursuant to 28 U.S.C. § 157(b)(2)(B). This court has constitutional authority to enter final orders in this contested matter. Stern v. Marshall , 564 U.S. 462, 499, 131 S.Ct. 2594, 180 L.Ed.2d 475 (2011).
A court "shall grant summary judgment if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a) (). A factual disagreement is genuine if "a rational trier of fact could find in favor of either party on the issue." SPC Plastics Corp. v. Griffith (In re Structurlite Plastics Corp. ), 224 B.R. 27, 30 (B.A.P. 6th Cir. 1998) (citing Schaffer v. A.O. Smith Harvestore Prods., Inc. , 74 F.3d 722, 727 (6th Cir. 1996) ). A fact is material if it might affect the outcome of the suit under substantive law. Niecko v. Emro Mktg. Co. , 973 F.2d 1296, 1304 (6th Cir. 1992) (quoting Anderson v. Liberty Lobby, Inc. , 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986) ). When reviewing a motion for summary judgment, a court views all evidence and draws all inferences in the light most favorable to the nonmoving party. Matsushita Elec. Indus. Co. v. Zenith Radio Corp. , 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986).
When a debtor files a bankruptcy petition under Chapter 7 of the Bankruptcy Code, all of his assets and property interests become part of the bankruptcy estate, and thus available to the Chapter 7 Trustee to administer for the benefit of creditors. 11 U.S.C. § 541(a)(1) ; Daley v. Mostoller (In re Daley ), 717 F.3d 506, 508 (6th Cir. 2013) (). However, debtors in bankruptcy may claim portions of their property as exempt from the bankruptcy estate. 11 U.S.C. § 522(d) ; Holland v. Star Bank, N.A. (In re Holland ), 151 F.3d 547, 548 (6th Cir. 1998) (). Because Ohio chose to withdraw from the federal exemptions in § 522(d), debtors domiciled in Ohio must look to the state statute to determine and claim applicable exemptions. In re Weatherspoon , 605 B.R. 472, 482 (Bankr. S.D. Ohio 2019) ; see 11 U.S.C. § 522(b)(2) (); Owen v. Owen , 500 U.S. 305, 308, 111 S.Ct. 1833, 114 L.Ed.2d 350 (1991) ().
The Trustee holds the burden to show by a preponderance of the evidence "that the [debtor's] exemptions are not properly claimed." Fed. R. Bankr. P. 4003(c) ; Baumgart v. Alam (In re Alam ), 359 B.R. 142, 147 (B.A.P. 6th Cir. 2006). Further, "Ohio exemption provisions are to be construed liberally in favor of the debtor and a debtor's dependents and any doubt in interpretation should be in favor of granting the exemption." Id. at 148 (quoting In re Oglesby , 333 B.R. 788, 791 (Bankr. S.D. Ohio 2005) ); In re Cook , 406 B.R. 770, 772 (Bankr. S.D. Ohio 2009) (similar). The Ohio exemption statute states in relevant part:1
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