Moyer v. Slotman (In re Slotman)

Decision Date05 December 2013
Docket NumberCase No: GG 11-11037,Adversary Proceeding No. 12-80232
PartiesIn re: TERRI LYNN SLOTMAN, Debtor. JEFF A. MOYER, Chapter 7 Trustee, Plaintiff, v. RICHARD ALAN SLOTMAN and EUGENE D. SLOTMAN d/b/a GENE'S MACHINE REPAIR, Defendants.
CourtUnited States Bankruptcy Courts. Sixth Circuit. U.S. Bankruptcy Court — Western District of Michigan

Chapter 7

OPINION PARTIALLY GRANTING DEFENDANTS'

MOTION FOR SUMMARY JUDGMENT

Appearances:

Jessica B. Allmand, Esq. and Frances Belzer Wilson, Esq., Bloomfield Hills, Michigan, attorneys for Jeff A. Moyer, Chapter 7 Trustee, Plaintiff.

Ronald J. Vander Veen, Esq., Holland, Michigan, attorney for Richard Alan Slotman and Eugene D. Slotman, Defendants.

I. INTRODUCTION.

In January 2011, Richard Alan Slotman transferred his ownership interest in Gene's Machinery Repair (the "Business" ) to his father, Eugene D. Slotman (Richard and Eugene Slotman are referred to collectively herein as the "Defendants"). At the time of the transfer, Richard Slotman was married to Terri Lynn Slotman (often referred to herein as the"Debtor"). Four months later, in May 2011, Richard Slotman commenced a divorce action against Terri Slotman. After the divorce case was filed, but prior to entry of a judgment of divorce, Terri Slotman filed a voluntary petition under chapter 7 of the Bankruptcy Code.1

Jeff A. Moyer, the chapter 7 trustee (the "Trustee") in Terri Slotman's bankruptcy case, filed this adversary proceeding primarily seeking to avoid the prepetition, pre-divorce transfer of the Business as a fraudulent conveyance. The Trustee alleges that Terri Slotman had an ownership interest in the Business because it was, or would have been, part of the parties' marital estate under Michigan law. For the reasons that follow, the court rejects the Trustee's assertion. To the extent the Trustee's claims rely on the Debtor's asserted marital property interest, the claims shall be dismissed for no cause of action.

II. JURISDICTION.

This court has jurisdiction over this bankruptcy case. 28 U.S.C. § 1334. The case and all related proceedings have been referred to this court for decision. 28 U.S.C. § 157(a); Local Rule 83.2(a) (W.D. Mich.). This adversary proceeding is a statutory core proceeding. 28 U.S.C. § 157(b)(2)(E) (orders to turn over property of the estate) & (H) (proceedings to determine, avoid, or recover fraudulent conveyances).

Both the Plaintiff and the Defendants filed statements indicating their express consent to this court entering a final order in this adversary proceeding. (AP Dkt. Nos. 18 & 20.) Therefore, notwithstanding the holdings in Stern v. Marshall, ___ U.S. ___, 131 S. Ct.2594, 180 L.Ed.2d 475 (2011) and Waldman v. Stone, 698 F.3d 910 (6th Cir. 2012), this court strongly believes it is constitutionally authorized to enter a final order. See Tibble v. Wells Fargo Bank, N.A. (In re Hudson), 455 B.R. 648, 656 (Bankr. W.D. Mich. 2011) (the Stern decision is extremely narrow; "[e]xcept for the types of counterclaims addressed in Stern v. Marshall, a bankruptcy judge remains empowered to enter final orders in all core proceedings"); see also McClarty v. University Liggett School (In re Karolak), AP No. 13-04394, 2013 WL 4786861 (Bankr. E.D. Mich. Sept. 6, 2013) (bankruptcy court has constitutional authority to enter a final order dismissing trustee's fraudulent conveyance complaint because both parties consented to entry of a final judgment and the fraudulent conveyance claims at issue are core proceedings).

III. FACTS.

The material facts pertaining to the Debtor's alleged marital property interest in the Business are not in dispute. In 1986, Defendant Eugene Slotman established Gene's Machinery Repair. (Dft. Motion for Summary Judgment, AP Dkt. 29, Exh. 1; Plf. Response to Motion for Summary Judgment, AP Dkt. No. 32, Exh. C.)2 The Business specialized in reconditioning steel rods for blueberry de-stemming equipment and in providing parts for such equipment. (Id.) Eugene Slotman operated the Business out of his barn for a number of years. (Id.)

In 2002, Eugene Slotman transferred the Business to his son, Richard Slotman. The parties' characterization of this transfer differ slightly. In their affidavits and depositiontestimony, Eugene and Richard Slotman explained that Eugene "loaned" the Business to his son, with the hope that it would provide Richard with extra income while he was experiencing financial troubles. (Plf. Exh. C & D; Dft. Exh. 1 & 15.) Eugene Slotman gave Richard possession of the business equipment, consisting of a compressor, drill press, small lathe, and some other small tools, with the understanding that Richard would return the equipment and ownership of the Business if he ever decided to stop operating it. (Id.) Richard and Eugene Slotman stated that there was no consideration paid to Eugene for the Business, although Richard said he agreed to pay rent for use of Eugene's barn at $1,000 per month. (Id.) Richard Slotman also explained that he periodically gave some of the profits from the Business back to his parents to repay them for the financial help they had given him over the years. (Plf. Exh. N.)

Terri Slotman's description of the transfer of the Business is generally consistent with Richard and Eugene's explanation, except that she recalled that Eugene intended to give the Business "us," i.e., to Terri and Richard jointly. (Plf. Exh. I, at 13-15.) She also explained that in exchange for the Business, she and Richard agreed to pay a percentage of their profits to Eugene. (Id. at 14-15.)

All the parties agree, however, that no written documentation of the transfer was prepared. (Plf. Exh. C, D & I; Dft. Exh. 1 & 15.) It is also undisputed that, after the transfer, Richard Slotman filed a Business Registration Certificate for a Person Conducting Business Under an Assumed Name or Partnership (the "Certificate of Assumed Name") with the Clerk of the Court for Allegan County, Michigan. (Plf. Exh. B; Dft. Exh. 4.) The Certificate of Assumed Name, and a renewal filed in 2007, both list Richard Slotman asthe sole owner of the Business. (Plf. Exh. B & M; Dft. Exh. 4 & 5.) In addition, from 2002 through 2010, Richard and Terri Slotman signed and filed annual joint tax returns. (Plf. Exh. I; Dft. Exh. 6-14) The tax returns identity Richard as the sole proprietor of the Business, and list income from the Business as self-employment income for Richard. (Dft. Exh. 6 - 14.)

There is also no dispute that Terri Slotman made significant contributions toward operation of the Business. She testified that she worked long hours drilling rods for the Business, both in her basement and in Eugene's barn. (Plf. Exh. I.) She also took orders, picked up parts and made deliveries for the Business. (Id.) Terri Slotman did not receive a salary or wages for her work. (Id.) At the same time, Richard Slotman took sole responsibility for the financial aspects of the Business. (Id.) He kept the financial records, handled the billing, wrote checks from the Business account, and made all decisions regarding the management of the Business. (Id.) Although Richard and Terri Slotman maintained at least two separate bank accounts at Huntington National Bank, one for the Business and one for their personal finances, both parties testified that the funds were commingled at times. (Plf. Exh I & N.) Richard Slotman explained that Business expenses were sometimes paid from the couple's personal funds. (Plf. Exh. N, at 43-44.) Terri Slotman testified that proceeds from the Business were often used to pay general household expenses. (Plf. Exh. I, at 56.)

In January, 2011, Richard Slotman transferred the Business back to his father, Eugene Slotman. (Plf. Exh. C & D; Dft. Exh. 1 & 15.) Richard Slotman filed a Notice of Dissolution of Co-Partnership or Business Under Assumed name on January 18, 2011.(Plf. Exh. E; Dft. Exh. 16.) Eugene Slotman re-took possession of the Business equipment, some of which had never left his barn. (Plf. Exh. D; Dft. Exh. 15.) On January 19, 2011, Eugene Slotman filed a new Certificate of Assumed Name listing himself as owner of Gene's Machinery Repair. (Dft. Exh. 17.)

On May 23, 2011, Richard Slotman filed divorce proceedings against Terri Slotman in the Ottawa County Circuit Court. (Plf. Exh J; Dft. Exh 2.) Approximately five months later, on October 31, 2011, while the divorce proceedings were pending but prior to entry of a judgment of divorce, Terri Slotman filed a voluntary chapter 7 petition in this court. (Dkt. No. 1.) Jeff A. Moyer was appointed as the chapter 7 trustee in the Debtor's bankruptcy case.

On June 6, 2012, the Trustee filed this adversary proceeding against Richard and Eugene Slotman. (AP Dkt. No. 1.) The Trustee's complaint alleges that the pre-divorce transfer of the Business from Richard Slotman to his father, Eugene Slotman, in January, 2011, constituted an actual and constructive fraudulent transfer of the Debtor's property under § 548(a)(1)(A) and (B), and under § 544(b) and applicable Michigan law incorporated within the Bankruptcy Code. Although the complaint states that the Business was transferred by Richard Slotman, it asserts that the Debtor had a one-half interest in the Business as of the date of the transfer, because the Business was part of her marital estate. The complaint further alleges that Richard and Eugene Slotman were unjustly enriched by the transfer, and that Eugene Slotman should be compelled to turn over the Debtor's interest in the Business to the Trustee under § 542.

The Defendants filed a motion for summary judgment on April 11, 2013, allegingthat the fraudulent transfer counts of the Trustee's complaint should be dismissed for no cause of action because the Debtor did not have an ownership interest in the Business when it was transferred to Eugene Slotman in January 2011, prior to the initiation of the divorce proceedings.3 (AP Dkt. No. 29.) The Trustee filed a response to the motion, and hearing was held on June 24, 2013. (AP Dkt. Nos. 32 & 34.) After the hearing, the...

To continue reading

Request your trial

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT