In re Sustaita

Decision Date23 July 2021
Docket NumberCase No. GL 21-00026-jtg
Citation631 B.R. 403
Parties IN RE: Cristobal R. SUSTAITA and Janie M. Sustaita, Debtors.
CourtU.S. Bankruptcy Court — Western District of Michigan

Courtney K. Roberts, Esq., for Barbara P. Foley, Chapter 13 Trustee.

Michelle Marrs, Esq., Marrs & Terry, PLLC, Ann Arbor, for Cristobal R. Sustaita.

OPINION REGARDING OBJECTION TO EXEMPTIONS CLAIMED UNDER MICH. COMP. LAWS § 600.5451

John T. Gregg, United States Bankruptcy Judge

Cristobal R. Sustaita, one of the debtors in this jointly-filed chapter 13 case (the "Debtor"), claimed certain exemptions under Mich. Comp. Laws § 600.5451, Michigan's bankruptcy-specific exemption statute. Barbara P. Foley, the chapter 13 trustee (the "Trustee"), objected to two of those exemptions because she contends that (i) checking and savings accounts, including the funds on deposit therein, do not constitute "[p]rovisions ... for comfortable subsistence" of a debtor and his or her household for six months under Mich. Comp. Laws § 600.5451(1)(b), and (ii) a debtor's interest in a trust cannot be exempted as a "homestead" under Mich. Comp. Laws § 600.5451(1)(m).

For the following reasons, the court shall sustain the Trustee's objections.1

JURISDICTION

The court has jurisdiction pursuant to 28 U.S.C. §§ 1334(a) and 157. This is a core proceeding under 28 U.S.C. § 157(b)(2)(B).

BACKGROUND

The facts are not complicated. In 2005, the Debtor and Juana M. Sustaita formed a revocable trust under Michigan law entitled The Cristobal R. Sustaita and Juana M. Sustaita Revocable Living Trust, dated September 10, 2005 (the "Trust"). According to the Abstract of Trust Agreement (the "Trust Agreement"), the Debtor and Ms. Sustaita were the co-grantors/settlors, the trustees, and the beneficiaries of the Trust.

The Trust Agreement was accompanied by a Declaration of Intent (the "Declaration"), which states that as trustees of the Trust, the Debtor and Ms. Sustaita:

have acquired and will hold in the name of The Cristobal R. Sustaita and Juana M. Sustaita Revocable Living Trust ... all items listed on Schedule A attached hereto and incorporated herein as amended from time to time and in addition to all household furnishing, automobiles, farming equipment, jewelry, bank accounts, securities, bonds, clothing, and other personal property in our name and henceforth such assets shall and will belong to the said trust and not to us individually or jointly. We further declare that, except to the extent of the interest provided to us under the terms and provisions of said Trust, that we have no personal interest in any of the above referenced personal properties, it being intended that this declaration constitutes an affirmation of the ownership by The Cristobal R. Sustaita and Juana M. Sustaita Revocable Living Trust...

Attached to the Declaration was a schedule designating certain real property in Holt, Michigan (the "Real Property") as part of the Trust res . Around the same time that the Trust was formed, the Debtor and Ms. Sustaita executed and recorded with the register of deeds for Ingham County, Michigan a quit claim deed transferring all right, title and interest in the Real Property to the Trust.

On January 7, 2021, the Debtor and Ms. Sustaita filed a joint petition for relief under chapter 13 of the Bankruptcy Code.2 In his Schedule C, the Debtor claimed an exemption in his "checking and savings: MSU FCU" accounts in the amount of $200.00 (the "Accounts") pursuant to Mich. Comp. Laws § 600.5451(1)(b). In addition, the Debtor claimed as exempt the "Cristobal and Juana Sustaita Trust – 1654 Grayfairs Ave, Holt, MI 48842" in the amount of $60,725.00 pursuant to Mich. Comp. Laws § 600.5451(1)(m).3

The Trustee filed a timely objection [Dkt. No. 26] to the two exemptions, after which the court held a preliminary hearing to determine the issues as required under Fed. R. Bankr. P. 4003(c). In accordance with the court's scheduling order [Dkt. No. 33], the parties filed briefs [Dkt. Nos. 34, 38], a stipulated list of exhibits [Dkt. No. 40], a stipulated list of facts [Dkt. No. 41], and witness lists [Dkt. Nos. 39, 42]. The parties agreed in the stipulation of facts that the Debtor is claiming "a $60,725.00 exemption in the trust" and "an exemption of $200.00 in credit union accounts." (Stip. of Facts at ¶¶ 4, 6.)

During the evidentiary hearing, no witnesses were called to testify, nor were any documents introduced into evidence beyond those included in the stipulated list of exhibits. At the conclusion of the hearing, the court took the matter under advisement.

ISSUES

The issues before the court are as follows:

(i) whether checking and savings accounts, including money on deposit therein, constitute "provisions ... for comfortable subsistence" of a debtor and his or her household for six months under Mich. Comp. Laws § 600.5451(1)(b) ; and
(ii) whether an interest in a revocable trust may be exempted as a "homestead" under Mich. Comp. Laws § 600.5451(1)(m).
DISCUSSION

Subject to a state's ability under section 522(b)(2) to "opt-out" of the federal exemption scheme, an individual debtor may claim exemptions under either section 522(d) or applicable non-bankruptcy law. 11 U.S.C. § 522(b)(1) ; see Shapiro v. Sassak (In re Sassak) , 426 B.R. 680, 690-95 (E.D. Mich. 2010). The State of Michigan has not exercised its option under section 522(b)(2), meaning that a debtor may use (i) the federal exemptions set forth in section 522(d), or (ii) the exemptions available under Michigan law. See 11 U.S.C. § 522(b)(1), (3).

In this case, the Debtor claimed all of his exemptions under Mich. Comp. Laws § 600.5451, a statutory scheme available only to a Michigan resident who is the subject of an order for relief under the Bankruptcy Code. See Richardson v. Schafer (In re Schafer) , 689 F.3d 601, 604 (6th Cir. 2012). This court must therefore apply the statute "in accordance with the controlling decisions of the state supreme court." Petroleum Enhancer, LLC v. Woodward , 558 F. App'x 569, 573 (6th Cir. 2014) (internal quotations and citations omitted).

In the event that issues of state law are undecided, the court "must make ‘the best prediction ... of what the [Michigan] Supreme Court would do if it were confronted’ " with the same issues. Kravitz v. Summersett (In re Great Lakes Comnet, Inc.) , 586 B.R. 718, 724 (Bankr. W.D. Mich. 2018) (quoting Managed Health Care Assocs. v. Kethan , 209 F.3d 923, 927 (6th Cir. 2000) (quotation omitted)). All relevant authority should be taken into account. Id . (citing Mazur v. Young , 507 F.3d 1013, 1016-17 (6th Cir. 2007) (citation omitted)).

A. The Debtor May Not Exempt the Accounts Under Mich. Comp. Laws § 600.5451(1)(b)

Section 600.5451(1)(b) of the Michigan Compiled Laws provides that a debtor in bankruptcy may exempt "provisions and fuel for comfortable subsistence of each householder and his or her family for 6 months." Mich. Comp. Laws § 600.5451(1)(b) (emphasis added). The Trustee argues that the term "provisions" does not include depository accounts, including money contained therein, as a matter of law. As support, she relies on definitions from dictionaries that were published shortly before and after the enactment of Mich. Comp. Laws § 600.5451 in 2004. The Trustee further contends that this court should decline to consider the meaning of the term "subsistence," as to do so would render the term "provisions" superfluous. Finally, the Trustee suggests that because Michigan law does not provide an express exemption for money, this court should infer that the Michigan legislature intended for all of a debtor's money, including any on deposit in accounts, to be made available to satisfy debts owed to creditors.

Primarily relying on In re Richardson , 621 B.R. 413 (Bankr. E.D. Mich. 2020), the Debtor argues that the court should look beyond the term "provisions" by considering all of the terms in the phrase "provisions ... for comfortable subsistence." Accordingly, the Debtor implicitly directs the court to the meaning of the term "subsistence" as defined by at least one dictionary published around the time that the Michigan legislature first used the phrase "provisions ... for comfortable subsistence."

1. The History of Mich. Comp. Laws § 600.5451(1)(b)

Although Mich. Comp. Laws § 600.5451(1)(b) was enacted in 2004, the phrase "provisions and fuel for the comfortable subsistence" first appeared in Michigan's exemption scheme in 1842, five years after Michigan attained statehood.4 Described as "[a]n act to exempt certain property from execution, or sale for any debt, damages, fine or amercement," the Michigan Public Acts of 1842 provided as follows:

That the household and kitchen furniture of each householder not exceeding in value two hundred and fifty dollars; the wearing apparel of every person and family; the library of every individual and family not exceeding in value one hundred and fifty dollars; the types, presses and other materials of every printing office not exceeding one hundred and fifty dollars in value; the tools, implements and stock necessary to enable every mechanic to carry on his business, not exceeding in value one hundred and fifty dollars; all spinning wheels and weaving looms with their apparatus used in families; the pews, slips and seats in every place of public worship, all public cemetaries [sic], all rights of burial, and tombs while in use as repositories of the dead; one fishing skiff or boat, seine, nets or other necessary apparatus to every person whose principal occupation or business is fishing, not exceeding in value sixty dollars; all arms and military equipage for man and horse; two cows, ten sheep, with the wool and cloth manufactured from the same, and five hogs to each householder; to each practical farmer, one yoke of cattle with yoke and chains, or one pair of horses and harness not exceeding in value eighty dollars, one plough, one harrow, one wagon or cart, with all other necessary implements of husbandry, which other
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4 cases
  • In re Cross
    • United States
    • United States Bankruptcy Courts. Sixth Circuit. U.S. Bankruptcy Court — Western District of Michigan
    • March 24, 2022
    ...is required to "apply the statute ‘in accordance with the controlling decisions of the state supreme court.’ " In re Sustaita , 631 B.R. 403, 406 (Bankr. W.D. Mich. 2021) (quoting Petroleum Enhancer, LLC v. Woodward , 558 F. App'x 569, 573 (6th Cir. 2014) ). However, the parties did not cit......
  • In re Cross
    • United States
    • United States Bankruptcy Courts. Sixth Circuit. U.S. Bankruptcy Court — Western District of Michigan
    • March 24, 2022
    ...re Sustaita, 631 B.R. at 406 (internal quotations, alterations, and citations omitted). "All relevant authority should be taken into account." Id. sole reported Michigan case this court was able to locate which addressed the exemption of pension plan interests, albeit under the general exem......
  • Corcoran v. Richardson
    • United States
    • U.S. District Court — Eastern District of Michigan
    • March 31, 2022
    ...In re Thibaudeau , No. 19-21006-dob, 2019 WL 6125311, 2019 Bankr. LEXIS 3574 (Bankr. E.D. Mich. Nov. 18, 2019) ; In re Sustaita , 631 B.R. 403, 413 (Bankr. W.D. Mich. 2021). Corcoron's Appeal appears to be the first on this issue.In Barlow , a debtor sought a $400 exemption in her checking ......
  • Corcoran v. Richardson
    • United States
    • U.S. District Court — Eastern District of Michigan
    • March 31, 2022
    ...the court reviewed nineteenth century dictionary definitions of the term “provisions” before finding the word unambiguous. As a result, Sustaita reasoned “that a debtor cannot exempt depository accounts or money under Mich. Comp. Laws § 600.5451(1)(b).” Id. at 415. The court proceeded to ap......

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