Renneker v. Wyman (In re Wyman), Case No. 19-31851

Citation626 B.R. 480
Decision Date15 March 2021
Docket NumberCase No. 19-31851,Adv. No.20-3004
Parties IN RE: Carroll Marcellus WYMAN Judy Ella Wyman, Debtors. Erin C. Renneker, Chapter 7 Trustee, Plaintiff, v. Judy Ella Wyman, Defendant.
CourtUnited States Bankruptcy Courts. Sixth Circuit. U.S. Bankruptcy Court — Southern District of Ohio

Stephen J. Malkiewicz, West Law Office, Springboro, OH, for Debtors.


Guy R. Humphrey, United States Bankruptcy Judge

I. Introduction

This adversary proceeding and its related contested matter arise out of the objection of Erin C. Renneker, the Chapter 7 trustee (the "Trustee") to debtor Judy Wyman's ("Judy") exemption in a motor vehicle, raise issues of whether Judy and her husband Carroll Wyman ("Carroll")1 engaged in permissible pre-bankruptcy exemption planning when Carroll transferred the title of a motor vehicle from his name to a joint title with Judy, and if that transfer may be avoided as either an actual or constructive fraudulent transfer. The proceeding and contested matter involve the intersection of the law concerning exemptions and fraudulent conveyances.

For the reasons to be explained, a material issue of fact exists as to Carroll's intent in transferring the vehicle, precluding summary judgment on the Trustee's actual fraudulent conveyance claim under 11 U.S.C. § 548(a)(1)(A). However, the Trustee is entitled to judgment against Judy under § 548(a)(1)(B) avoiding the transfer of the one-half interest conveyed by Carroll to Judy as constructively fraudulent. A material issue of fact also exists as to the value of the vehicle on the date of transfer and, therefore, the court will not enter judgment pursuant to 11 U.S.C. § 550(a)(1) until the value of the vehicle is established at trial or otherwise. The court denies the Trustee's objection to Judy's motor vehicle and wildcard exemptions. Judy's motion for summary judgment is also denied.

II. Factual and Procedural Background

In January 2017 Carroll purchased a 2011 Chevy Tahoe for $17,031.70 (the "vehicle"). Stipulation of Facts at ¶ 7 (doc. 13) ("Stipulations"). From the time it was acquired until May 29, 2019, Carroll was listed as the sole owner on the certificate of title. Stipulations at ¶ 8. Then on May 29th, approximately one week before the petition date, Carroll transferred title to the vehicle into the joint names of Carroll and Judy. Stipulations at ¶ 9; Exhibit 2. Judy paid Carroll no consideration for the transfer of the one-half interest in the vehicle. Stipulations at ¶ 10. Since the time title was transferred into their joint names, Judy has been listed as the primary driver on the vehicle insurance. Affidavit of Judy, Exhibit B at ¶ 4 (Doc. 17). After Carroll retired due to health issues, Judy was the only member of the household required to drive to her place of employment and the vehicle was the only source of transportation for the household. Id. at ¶¶ 2, 4. Judy has used the vehicle in her employment as a driver delivering newspapers. Id. at ¶ 4.

On June 8, 2019 Carroll and Judy filed their joint Chapter 7 bankruptcy petition initiating this case. Estate Doc. 1. They scheduled an interest held by Carroll in their residence, which they intended to surrender, with a value of $159,500 and a secured claim against it in the amount of $203,094. Id . at 10, 18. They also scheduled an interest in the vehicle, noting that it had 267,000 miles on it and a value of $9,100. Id. at 11. The remainder of their property interests were scheduled as totaling approximately $10,000. Id. at 15.

Carroll and Judy claimed two exemptions in the vehicle: $8,000 ($4,000 each) pursuant to Ohio Revised Code § 2329.66(A)(2) – the Ohio motor vehicle exemption – and an additional exemption of $1,100 pursuant to § 2329.66(A)(18) – the Ohio wildcard exemption. Id. at 16-17. Judy and Carroll are entitled to a $4,000 motor vehicle exemption under § 2329.66(A)(2), and a wildcard exemption of $1,325 under § 2329.66(A)(18) to the extent they each owned an interest in the vehicle. In McVicker , 546 B.R. 46, 60 n. 23 (Bankr. N.D. Ohio 2016) ; In re Gazvoda , Case No. 10-20715, 2011 WL 2946171, at *1–2, 2011 Bankr. LEXIS 2786, at *3-4 (Bankr. N.D. Ohio July 21, 2011).2

On September 12, 2019 the Trustee filed an objection to Carroll and Judy's claims of exemptions in the vehicle. Estate Doc. 17. The Trustee's objection asserts that the transfer by Carroll of the vehicle from his name to he and Judy constituted a fraudulent conveyance of the one-half interest conveyed to Judy. Judy and Carroll filed a response to the Trustee's objection to the exemptions asserted in the vehicle. On January 17, 2020 the Trustee filed the adversary proceeding alleging that an intentional and constructively fraudulent transfer took place when Carroll transferred title to the vehicle into their joint names. Adv. Doc. 1.

Both the Trustee and Judy have filed motions for summary judgment in the adversary proceeding. Adv. Docs. 16, 17.

III. Positions of the Parties

Judy contends that she and Carroll always considered that they both owned the vehicle, and that Judy was the primary driver. Judy contends that she was added to the vehicle title out of "an abundance of caution prior to the filing" because the vehicle was the only one in the household and was essential to her employment. Adv. Doc. 17 at 4. To show ownership of a vehicle in Ohio, an individual's name generally must be on the certificate of title. Ohio Rev. Code § 4505.04. Therefore, it is Judy's position that she was added to the title pre-petition to ensure she would retain the vehicle.3 Judy contends the title transfer was permissible pre-bankruptcy exemption planning and not a fraudulent transfer as she did not intend to deceive, harm, or defraud creditors.

The Trustee's position is that the transfer of the vehicle constitutes both an actual and a constructively fraudulent transfer of Carroll's interest to Judy, and the value of the transferred interest is recoverable for the bankruptcy estate.

IV. Analysis
A. Jurisdiction

This court has jurisdiction pursuant to 28 U.S.C. § 1334(b) and Amended General Order 05-02 of the United States District Court for the Southern District of Ohio. This is a core proceeding pursuant to 28 U.S.C. § 157(b)(2)(H) and (O), and this court has constitutional authority to enter final judgment by the knowing and voluntary consent of the parties. Doc. 7. Wellness Int'l Network, Ltd. v. Sharif , 575 U.S. 665, 135 S.Ct. 1932, 191 L.Ed.2d 911 (2015).

B. Summary Judgment Standard

Federal Rule of Civil Procedure 56(a), made applicable to this adversary proceeding through Federal Rule of Bankruptcy Procedure 7056, sets forth the standard to address the parties' filings. It states, in part, that a court must grant summary judgment to the moving party "if the movant shows that there is no genuine issue as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a). In order to prevail, the movant, if bearing the burden of persuasion at trial, must establish all elements of its claim. Celotex Corp. v. Catrett, 477 U.S. 317, 331, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). All inferences drawn from the underlying facts must be viewed in a light most favorable to the party opposing the motion. Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 587–88, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986).

C. Analysis of the Applicable Law
1. Separate Estates, But Jointly Administered, With the Same Trustee

Only an individual and the individual's spouse may file a joint bankruptcy petition. 11 U.S.C. § 302. However, as the Trustee aptly points out, unless the court orders otherwise, while joint cases are usually administered jointly, a joint debtors' bankruptcy estates, unless consolidated, are to remain separate. See Fed. R. Bankr. P. 1015(b) ; Reider v. FDIC (In re Reider ), 31 F.3d 1102, 1105 (11th Cir. 1994) ; In re Toland , 346 B.R. 444, 449 (Bankr. N.D. Ohio 2006). While only one trustee is generally appointed over joint cases, Rule 1015(b) provides that separate trustees may be appointed for each estate in a joint case to protect "creditors of different estates against potential conflicts of interest." Fed. R. Bankr. P. 1015(b).

While the Trustee acknowledges that the estates are separate, the estate for which she is seeking relief is not identified:

The Vehicle at issue is a rapidly depreciating asset for which turn over and liquidation would not restore the bankruptcy estate to same position it held had the Transfer nine days prior to the bankruptcy filing not taken place...Further, a sale of the diminished asset would incur further expense to the estate and reduce the dividend available to unsecured creditors ... A monetary judgment to the Trustee would place the estate in the same position it held absent the transfer. A judgment for the non-exempt equity of $5,175.00 in the Vehicle would save the estate money and provide a guaranteed return to Debtor's creditors .

Adv. Doc. 24 at 4 (emphasis added). The estate which would benefit from the Trustee's course of action, and which must be the "estate" referenced in the above-quoted paragraph, would be Carroll's estate. Similarly, any "guaranteed return" would need to be to Carroll's creditors, not to Judy's separate creditors.4

By seeking to avoid the transfer of the one-half interest in the vehicle to Judy, the Trustee is seeking to recover that interest after the exemption is applied, or in the alternative, a monetary judgment against Judy for the value of the interest transferred. Because if the one-half interest in the vehicle would remain in Judy's bankruptcy estate it would be fully exempt, or in the alternative, if a monetary judgment was rendered it would be directly against Judy (and not her bankruptcy estate), the court finds that no actual conflict exists arising out of the Trustee's service as ...

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