In re Tomlinson, Bankruptcy No. 04-12542.

• Decision Date: 16 June 2006
• Docket Number: Adversary No. 05-1226.,Bankruptcy No. 04-12542.
• Citation: 347 B.R. 639
• Parties: In re Joyce Marie TOMLINSON, Debtor. Douglas R. Johnson, Trustee, Plaintiff, v. David Larry Tomlinson, Defendant.
• Court: U.S. Bankruptcy Court — Eastern District of Tennessee

347 B.R. 639

In re Joyce Marie TOMLINSON, Debtor Douglas R. Johnson, Trustee, Plaintiff, v. David Larry Tomlinson, Defendant.

Bankruptcy No. 04-12542.

Adversary No. 05-1226.

United States Bankruptcy Court, E.D. Tennessee.

June 16, 2006.

COPYRIGHT MATERIAL OMITTED

Jason D. Demastus, Kennedy, Koontz & Farinash, Chattanooga, TN, Jerrold D. Farinash, Chattanooga, TN, for Douglas R. Johnson, Plaintiff.

Thomas E. Ray, Samples, Jennings, Ray & Clem, Chattanooga, TN, for David Larry Tomlinson, Defendant.

MEMORANDUM

JOHN C. COOK, Bankruptcy Judge.

This is an adversary proceeding by a chapter 7 trustee against the debtor's former husband for the turnover of a Cessna aircraft. The proceeding is before the court on cross motions for summary judgment. For the reasons that follow, the court is of the opinion that both motions should be denied.

I.

On May 30, 1995, the defendant purchased a Cessna C-172 aircraft from Larmont Aviation International. The defendant asserts that it was his intent that he would own the aircraft, and the bill of sale listed the defendant as the sole purchaser. A letter from the seller of the aircraft confirms that the defendant was the purchaser, and the commitment for the financing of the purchase was issued to the defendant. However, the debtor, who was then the defendant's wife, was named as a co-owner when the transfer was recorded with the Federal Aviation Administration. She also signed the promissory note (and, apparently, a security agreement) to NationsBank, the bank that financed the purchase. Both the defendant and the debtor, however, have given affidavits stating that the debtor participated in the transaction solely as an accommodation, that the debtor never exercised any right of ownership or control of the aircraft, and that she never made any payments on the debt for the purchase price. Both affidavits state that it was always intended by the debtor and the defendant that the aircraft would be considered the defendant's property.

On September 28, 1995, the defendant transferred a one-half interest in the aircraft to David Goins. The defendant's and debtor's affidavits indicate that, while only the defendant signed the bill of sale as seller, the debtor consented to the transaction. The transfer was never recorded with the FAA and, according to the defendant's affidavit, he and Mr. Goins never did that "since there was a lien held by Nations Bank to secure] the original purchase price."

On October 2, 2003, the defendant and the debtor entered into a marital dissolution agreement, which provided:

[E]ach party is hereby awarded all items of personal property, household goods, furnishings, and personal items of every type and nature presently in their respective possessions, and the other party is hereby divested of any right, title or interest therein.

On February 3, 2004, that agreement was incorporated into a final decree of divorce. The affidavits of both the defendant and the debtor state that, on the date of the marital dissolution and the date of divorce, the defendant was in possession and control of the aircraft. This assertion is supported by a hangar lease between the defendant and Collegedale Municipal Airport. The debtor's affidavit goes on to state that she understood the divorce to have divested her of any interest in the aircraft.

On April 21, 2004, the debtor filed a voluntary petition for relief under Chapter 7 of the Bankruptcy Code. The plaintiff was appointed trustee and filed the instant complaint seeking a determination of the parties' respective interests in the aircraft, its turnover, and authorization to sell the debtor's alleged interest in the aircraft¹

II.

A.

There are two issues addressed by the parties in this proceeding. The first issue is whether the debtor ever owned a one-half interest in the aircraft. If she did not, the trustee loses. If she did, the court must consider the second issue, namely, whether the divorce decree and marital dissolution agreement transferred the debtor's interest in the aircraft to the defendant such that the trustee cannot avoid the transfer under 11 U.S.C. § 544.

Addressing the first issue, the trustee appears to argue that, because the document recorded with the FAA names the debtor as a co-owner of the aircraft, the debtor's one-half interest is thereby conclusively established. That is not the case, however. While the recordation indicates that the defendant transferred an interest in the aircraft to the debtor after he purchased it, the Federal Aviation Act specifically provides that "[t]he validity of a conveyance ... that may be recorded under section 44107 of this title is subject to the laws of the State ... at which the conveyance ... is delivered." 49 U.S.C. § 44108(c); see also id. § 44103(c)(2) ("A certificate of registration issued under this section is ... not evidence of ownership of an aircraft in a proceeding in which ownership is or may be in issue."). Thus, Congress "left to state law the legal effect of a recorded instrument." Sanders v. M.D. Aircraft Sales, Inc., 575 F.2d 1086, 1088 (3d Cir.1978) (citation omitted); accord, e.g., Aircraft Trading & Servs., Inc. v. Braniff, Inc., 819 F.2d 1227, 1231 (2d Cir. 1987). This means that the court must look to Tennessee law to determine the defendant's and debtor's ownership interests in the aircraft.

Although the parties have not cited a Tennessee case that addresses the factors a court should consider in determining ownership of an aircraft, the court believes Tennessee courts would use the same factors that are used by Tennessee courts to determine ownership of automobiles and other personal property. It is the law in this state "that the intention of the parties, not the certificate of title, determines the ownership of an automobile." Smith v. Smith, 650 S.W.2d 54, 56 (Tenn. Ct.App.1983). Thus, it has been held that intent governs whether the owner of a motor vehicle shown on the certificate of title transferred his interest to another. Mercado v. Travelers Ins. Co., 59 Tenn App. 741, 443 S.W.2d 819, 822-23 (1969); Stevens v. State Farm Mut. Auto. Ins. Co., 59 Tenn.App. 701, 443 S.W.2d 512, 513-14 (1969); Hayes v. Hartford Accident & Indem. Co., 57 Tenn.App. 254, 417 S.W.2d 804, 807-08 (1967). The court must consider the totality of the circumstances to determine the parties' intent. As one panel of the Tennessee Court of Appeals has explained:

Ownership is a purely legal concept. It connotes a "bundle of rights" or legally protected interests with regard to specific property. Included in this bundle of rights are (1) the right of possession, enjoyment, and use, (2) an unrestricted right of disposition, and (3) the right of testamentary disposition. Proof of ownership generally involves evidence with regard to possession and exercise of one or more of the prerogatives in this bundle of rights. Thus, ownership is a question for the trier-of-fact to determine from the evidence.

To determine ownership of a vehicle, a trier-of-fact may consider and weigh evidence relating to (1) the circumstances surrounding the vehicle's purchase, (2) the registration of the vehicle, (3) all aspects of insuring the vehicle, (4) all parties' financial stake in the vehicle, (5) the actual possession of the vehicle, (6) the responsibility for bearing the expense of operating, maintaining, and licensing the vehicle, and (7) the ultimate right to control the vehicle, including the right to make major decisions concerning the vehicle such as its use and restrictions on its use or the sale or other disposition of the vehicle.

Rivkin v. Postal, No. M1999-01947-COR3-CV, 2001 WL 1077952, at *11 (Tenn. Ct.App. Sept.14, 2001) (citations omitted); see Hayes, 417 S.W.2d at 808 (considering payment of purchase price and possession and control). The court sees no reason that these principles should not be applied in the present context.² See T.C.A. § 47-2-401(1) (establishing general rule that "title to goods passes from the seller to the buyer in any manner and on any conditions explicitly agreed on by the parties"); 1 Tenn. Jur. Gifts § 6 (2004) (gift requires intent to make gift); 1 Tenn. Jur. Assignments § 13 (2004) ("an intent to transfer must be manifest" to effect an assignment).

Here, in determining the extent of the interest (if any) that the debtor acquired, the facts favoring the plaintiff are the document recorded with the FAA and the debtor's signature on the promissory note (and possibly the security agreement) given to NationsBank for its advance of the purchase price. On the other hand, both the debtor and the defendant have stated under oath that they never intended for the debtor to have any interest in the aircraft and that she never exercised any control of the aircraft or made any payments thereon.³ The court believes that the recordation and loan documents raise a sufficient question such that the court should have an opportunity to evaluate the witnesses' credibility at trial. Determining this issue will be a matter of weighing the conflicting evidence and making findings of fact based upon a preponderance of evidence standard. A court should refrain from assessing the probative value of the material presented in connection with a motion for summary judgment, especially where such assessment will turn in large part on the witnesses' credibility. See generally 10A Charles Alan Wright, Arthur R. Miller & Mary Kay Kane, Federal Practice and Procedure §§ 2726-2728 (3d ed.1998).

B.

Even though there are genuine issues of material fact regarding the debtor's initial ownership interest in the aircraft, the defendant relies on the divorce decree as a second line of defense. The defendant argues that, even if the court were to find that the debtor originally held a one-half interest in the aircraft, that interest was conveyed to the defendant by the divorce decree and marital dissolution agreement, and the plaintiff cannot set aside that...