Matter of Turner, 97-40191

CourtUnited States Bankruptcy Courts. Eleventh Circuit. U.S. Bankruptcy Court — Northern District of Alabama
Citation209 BR 558
Docket NumberNo. 97-40191,96-43302.,97-40191
PartiesIn the Matter of Carol Ann TURNER, Debtor. Carol Ann TURNER, Plaintiff, v. DeKALB BANK, Defendant.
Decision Date03 June 1997

Ralph K. Strawn, Jr., Henslee, Robertson & Strawn, Gadsden, AL, for debtor/plaintiff.

Robert D. McWhorter, Jr., Inzer, Stivender, Haney & Johnson, P.A., Gadsden, AL, for defendant.

Linda Gore, Gadsden, AL, Chapter 13 Trustee.


JAMES S. SLEDGE, Bankruptcy Judge.

Defendant filed a motion for summary judgment on the ground that a repossessed vehicle is not property of the estate as a matter of law. Plaintiff seeks turnover of the vehicle, inter alia. All parties were present and represented by counsel at a scheduled hearing on April 2, 1997. The Court requested supplemental briefs. The Court has jurisdiction over this core proceeding. 28 U.S.C. §§ 1334(b) and 157(b)(2)(E). Based on the findings of fact and conclusions of law stated herein the motion is denied.


The parties have stipulated the material facts relevant to this inquiry. In 1990, Thomas F. Turner borrowed funds from DeKaIb Bank using his 1979 Ford pickup truck as collateral. The bank was listed on the certificate of title as a lienholder. The note was renewed several times and still owing in July of 1995 when Thomas Turner and his wife, the plaintiff-debtor, divorced. The divorce court awarded ownership of the truck to Carol Turner and directed Thomas Turner to make the remainder of payments owed to DeKalb Bank.

Mr. Turner defaulted on this obligation and on May 15, 1996, filed a petition for relief under Chapter 7, case number 96-41364-JSS-7. He failed to reaffirm the indebtedness on the truck and on October 15, 1996, DeKalb Bank repossessed it from Carol Turner. From the time of the divorce until the creditor's repossession, the truck had been in the exclusive possession of Ms. Turner. On November 8, 1996, she filed a petition for relief under Chapter 13, case number 96-43302-JSS-13. Her unconfirmed plan treats the debt owed to DeKalb Bank as secured and proposes full payment plus eight percent interest. The debtor also claimed the truck as exempt property pursuant to Ala.Code § 6-10-6 (1975). The hearing on confirmation has been continued pending resolution of this motion.

Once the petition was filed, counsel for the debtor contacted DeKalb Bank demanding the return of the truck to Ms. Turner. The bank declined based upon its belief that complete ownership in the truck transferred to it upon default. The debtor filed an adversary complaint in this Court on February 27, 1997, seeking turnover of the property pursuant to 11 U.S.C. § 542, contempt, and an injunction against the creditor to prevent the sale of the repossessed truck. Further, the debtor requested damages for violation of the automatic stay.1

A motion for summary judgment was then filed by DeKalb Bank asserting that the vehicle was not property of the estate; and, therefore, not subject to turnover. Consequently, the creditor denied violation of the automatic stay and denied contempt. The issue of whether the truck is property of the estate under § 541(a), and whether the debtor's ownership interests in the truck terminated upon default was taken under submission on April 10, 1997. DeKalb Bank has agreed to retain possession of the truck until the rights and interests of the parties can be resolved by this Court.


Summary judgment is proper if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue of material fact and that the moving party is entitled to judgment as a matter of law. Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 2552, 91 L.Ed.2d 265 (1986). The inferences to be drawn from the underlying facts must be viewed in the light most favorable to the party opposing the motion. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249, 106 S.Ct. 2505, 2510, 91 L.Ed.2d 202 (1986). In the present case, there are no material facts in dispute; therefore, the issue before the Court is one of law.

a. Turnover

The right of a debtor to compel turnover of property is contingent upon the interests the debtor has in the property. 11 U.S.C. § 542 states:

Except as provided in subsection (c) or (d) of this section, an entity . . . in possession, custody or control, during the case, of property that the trustee may use, sell, or lease under section 363 of this title, or that the debtor may exempt under section 522 of this title, shall deliver to the trustee, and account for such property or the value of such property, unless such property is of inconsequential value or benefit to the estate.

In other words, if the property is such that the trustee may use, sell, or lease pursuant to § 363 or that the debtor may exempt pursuant to § 522, then the debtor may compel the creditor to release possession. A Chapter 13 debtor has the exclusive authority to exercise the rights and powers of a trustee under § 363(b). 11 U.S.C. § 1303. Thus, the Court must determine what property falls within the purview of these provisions. Section 363 grants the trustee with the authority to use, lease or sale "property of the estate." 11 U.S.C. § 363(b)(1). Property of the estate is defined as "all legal or equitable interests of the debtor in property as of the commencement of the case." 11 U.S.C. § 541(a)(1). Pursuant to 11 U.S.C. § 522, a debtor may exempt certain property from property of the estate. "The right to claim property exempt presupposes that the debtor must have a property interest in that property." Gerold v. Compass Bank (In re Gerold), Ch. 13 Case No. 97-01188-TOM-13, Adv. No. 97-00076, slip op. at 4 (Bankr.N.D.Ala. April 18, 1997). Therefore, in order to compel turnover, the debtor must have a legal or equitable interest in the collateral for purposes of § 363 or have a property interest in it pursuant to § 522.

"Property of the estate" includes "all legal or equitable interests of the debtor in property as of the commencement of the case." 11 U.S.C. § 541(a)(1). This statute is to be broadly construed to effectuate the intent of Congress that "a broad range of property be included in the estate." United States v. Whiting Pools, Inc., 462 U.S. 198, 204-05, 103 S.Ct. 2309, 2313-14, 76 L.Ed.2d 515 (1983). See United States v. Challenge Air International, Inc., 952 F.2d 384, 387 (11th Cir.1992) (Whiting Pools authorized turnover of the debtor's property held by a secured creditor to maximize the estate in order to facilitate reorganization). A property interest is defined to include "any type of right to specific property whether it is personal or real property, tangible or intangible." Black's Law Dictionary 1218 (6th ed.1990). Given this broad generic definition, whether labeled property of the estate, legal interest, equitable interest, or property interest, the analysis is the same because each term is included under the definition of property rights. In most instances then, it makes no difference whether the debtor proceeds under § 363 or § 522. However, in some districts the right to pursue turnover pursuant to § 363 depends upon whether the proposed bankruptcy plan has been confirmed. 11 U.S.C. § 1327(b) states that "except as otherwise provided in the plan or the order confirming the plan, the confirmation of a plan vests all of the property of the estate in the debtor." Some bankruptcy courts within the Northern District of Alabama, for example, have opted to revest title in the debtor at confirmation. See Gerold v. Compass Bank (In re Gerold), Ch. 13 Case No. 97-01188-TOM-13, Adv. No. 97-00076 (Bankr.N.D.Ala. April 18, 1997). The estate having no property remaining at confirmation, a suit compelling turnover pursuant to § 363 would fail. However, in this division, the order confirming plans provides that the estate holds title to the property until discharge or dismissal of the plan, so either prong remains a viable option to the debtor throughout his or her case. Nevertheless, the confirmation hearing in this case has been continued and the plan has not been confirmed.

b. Defining Property Interest

The issue in the present case is whether Alabama law provides the debtor with any property rights in collateral that has been repossessed after default, and if so, whether those rights are sufficient so that the debtor may compel turnover of the property into the estate or may exempt it from property of the estate. State law determines the extent of any property interests a debtor may have, and federal law determines whether those rights are sufficient to constitute property of the estate or property exempt from the estate. Southtrust Bank v. Thomas (In re Thomas), 883 F.2d 991, 995 (11th Cir.1989).

DeKalb Bank relies upon Charles R. Hall Motors, Inc. v. Lewis, et. al., Case No. CV-94-B-1471-E (D.N.D.Ala.1997). In that adversary proceeding, this Court found that a creditor's refusal to return a repossessed vehicle to a debtor after notification of a bankruptcy filing constituted a willful violation of the stay. On appeal, the District Court reversed because the automobile was not property of the estate. Id. at 5. To reach this conclusion, the District Court found that Alabama common law transferred title and right of possession at the time of default to the creditor, leaving debtors with only a right to redeem the property. Id. at 6.

The District Court next addressed federal law and concluded that "(t)he right to redeem the property was not sufficient to propel the automobile into the property of the estate." Id. at 7 (citing Southtrust Bank v. Thomas (In re Thomas), 883 F.2d 991 (11th Cir.1989)). District Judge Blackburn distinguished the case before her from similar cases such as Carr v. Security Savings & Loan Assoc., 130 B.R. 434 (D.N.J.1991), which held that property repossessed pre-petition was part of...

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