Laquita D Curry

UNITED STATES BANKRUPTCY COURT
FOR THE SOUTHERN DISTRICT OF OHIO
WESTERN DIVISION AT DAYTON
In re: 	L AQUITA D. CURRY
Debtor
Case No. 	05-36056
Judge L. S. Walter
Chapter 13
DECISION OF THE COURT:
1) DENYING TIDEWATER FINANCE COMPANY’S MOTION TO TERMINATE THE
AUTOMATIC STAY; AND
2) OVERRULING TIDEWATER FINANCE COMPANY’S OBJECTION TO
CONFIRMATION OF CHAPTER 13 PLAN.
MATTER BEFORE THE COURT
This matter is before the court on the Objection of Tidewater Finance to Confirmation of
Chapter 13 Plan [Doc. 15] and its related Motion to Terminate the Automatic Stay [Doc. 9]. The
court considered Tidewater’s filings at the confirmation hearing held on August 23, 2005. The
court took the matter under advisement and allowed the parties to file post-hearing briefs [Docs.
This document has been electronically entered in the records of the United
States Bankruptcy Court for the Southern District of Ohio.
IT IS SO ORDERED.
Dated: November 16, 2005
____________________________________________________________
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28 and 30] and a Joint Stipulation of Fact [Doc. 31]. The court has reviewed the filings and the
arguments of the parties and is now prepared to render its decision.
SUMMARY OF RESOLUTION
Tidewater Finance Company (“Tidewater”) is a secured creditor in this Chapter 13
bankruptcy case with a lien on the vehicle of Debtor Laquita D. Curry (“Debtor”). Tidewater
objects to confirmation of the Debtor’s Chapter 13 plan based on the plan’s “cram down”
treatment of its claim and requests relief from the automatic stay to dispose of the Debtor’s
vehicle that Tidewater repossessed prior to the bankruptcy filing. In its various pleadings,
Tidewater argues that its lawful prepetition repossession of the Debtor’s vehicle changes the
Debtor’s property rights in the vehicle so that Tidewater’s secured claim is no longer subject to
modification and “cram down” in a Chapter 13 case.
Although Tidewater’s arguments have been determined valid by other circuits
interpreting various state laws regarding repossession and its impact on property rights, case law
in the Sixth Circuit interpreting applicable Ohio statutes establishes that a debtor’s property
rights in a repossessed vehicle remain intact until that vehicle is sold. Consequently, a debtor
may modify the secured creditor’s claim and cram it down in a Chapter 13 plan even if the
creditor lawfully repossessed the collateral prior to the bankruptcy filing. Pursuant to this
precedent, the Debtor’s retention of the vehicle and treatment of Tidewater’s claim in her
Chapter 13 plan is valid. For these reasons, Tidewater is not entitled to relief from the automatic
stay and its objection to confirmation is overruled.
FACTUAL AND PROCEDURAL BACKGROUND
The following facts are derived from the parties’ Joint Stipulation of Fact [Doc. 31] and
the exhibits attached thereto:
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On January 6, 2004, the Debtor purchased a 2000 Saturn SL vehicle from Jeff Wyler
Chevrolet and financed it through a Retail Installment Contract and Security Agreement
(“Contract”). [Doc. 31, ¶ 1 and Ex. A.] The vehicle was the collateral for the Debtor’s promise
to make monthly payments. [Id.] 	Tidewater is the assignee of the Contract and perfected its
security interest in the vehicle by noting its lien on the title. [Id., ¶ 2 and Ex. B; Doc. 15, ¶ 2.]
Prior to the Debtor’s bankruptcy filing on June 17, 2005, the Debtor defaulted on her
monthly payments to Tidewater resulting in Tidewater repossessing the vehicle on May 25,
2005. [Doc. 31, ¶¶ 3-4.]
On the filing date, the NADA retail value of the vehicle was $7875 and its trade in value
was $6200. The average of these two is $7038. [Id., ¶ 5 and Ex. C.]
The accelerated balance due under the Contract on the filing date was $10,718.83. This
amount consisted of $10,008.88 in principal, $300.95 in accrued interest, $9.00 in late charges
and $400.00 in repossession fees. [Id., ¶ 6.] Tidewater has paid the repossession fees. [Id.]
On the filing date, Tidewater had not obtained a Certificate of Title to the vehicle
pursuant to Ohio Rev. Code § 4505.10. [Id., ¶ 7.] In addition, Tidewater had not disposed of the
vehicle pursuant to Ohio Rev. Code § 1317.16 or § 1309.610. [Id., ¶ 8.]
If the Debtor had not filed a bankruptcy petition, she could have exercised her rights to:
1) redeem the vehicle by paying cash in the amount of $10,718.83 pursuant to Ohio Rev. Code §
1309.623 [Id., ¶ 9]; or 2) reinstate the Contract by paying Tidewater the sum of $1544.17
pursuant to Ohio Rev. Code § 1317.12 [Id., ¶ 10]. The Debtor did not exercise her right to
redeem the vehicle or reinstate the Contract on or before the bankruptcy filing date. [Id., ¶ 11.]
In addition, the Debtor does not exercise her state law right to redeem the vehicle or reinstate the
Contract in her Chapter 13 plan. [Id., ¶ 12.]
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The Debtor filed her Chapter 13 plan valuing the vehicle and Tidewater’s allowed
secured claim at $6700. [Id.] The Debtor treats the remainder of the claim as an unsecured
claim. [Id.] 	Because the Debtor’s plan proposes to pay less than the contract rate of interest on
the secured portion of the claim and only 9% of the unsecured portion, the plan will not satisfy
the entire monetary amount due under the terms of the Contract.
LEGAL ANALYSIS
Tidewater argues that under state law, its lawful repossession of the Debtor’s vehicle
prior to the bankruptcy petition filing date limits the Debtor’s rights in the vehicle to a right of
redemption or of reinstatement of the debt. According to Tidewater, the Debtor’s rights in the
repossessed vehicle are so changed and limited that the Debtor’s use of 11 U.S.C. § 1322(b)(2)
to modify and cram down Tidewater’s secured claim in her Chapter 13 plan is rendered invalid.
Consequently, Tidewater asserts entitlement to full payment of its claim as a secured creditor or
relief from the automatic stay to dispose of the repossessed vehicle.
Although Tidewater’s arguments have been held to have merit based on interpretations of
other state laws regarding property rights in repossessed collateral, the case law of this circuit
interpreting applicable Ohio statutes supports a contrary view. The Sixth Circuit Bankruptcy
Appellate Panel has specifically addressed a debtor’s rights in a repossessed vehicle under Ohio
law based on facts similar to those in the case at hand. In National City Bank v. Elliott (In re
Elliott), National City Bank had a security interest in the debtors’ vehicle. 214 B.R. 148, 150
(B.A.P. 6th Cir. 1997). 	The debtors defaulted on their payments and National City Bank
lawfully repossessed the debtors’ vehicle pursuant to the requirements of Ohio statutory law in
order to sell the vehicle at auction. Id. However, prior to the scheduled auction date, the debtors
filed their bankruptcy petition. Id. 	National City Bank filed a motion for relief from the
automatic stay to sell the vehicle which was denied in the bankruptcy court. Id.
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On appeal to the Bankruptcy Appellate Panel, National City Bank relied on the fact that,
prior to the bankruptcy filing, it had obtained a repossession title to the vehicle under Ohio Rev.
Code § 4505.10(A). This Ohio statute allows a secured creditor to obtain a repossession title so
that the creditor may then sell the vehicle at auction. Id. at 150-51. National City Bank argued
that its repossession title constituted a transfer of ownership so that the vehicle did not become
property of the debtors’ estate when they filed their bankruptcy petition. Id. at 150.
While recognizing that National City Bank had both possession of the vehicle and
repossession title prior to the bankruptcy filing, the Bankruptcy Appellate Panel rejected
National City Bank’s argument and concluded that the vehicle was still property of the estate
until the sale of the vehicle. In coming to its conclusion, the Appellate Panel relied in part on the
broad definition of property of the estate and in part on the limited property rights a secured
creditor has in a vehicle under Ohio law until it is sold at auction.
Property of the bankruptcy estate is broadly defined within the Bankruptcy Code to
include “all legal and equitable interests” of the debtor in property “wherever located and by
whomever held.” 11 U.S.C. § 541(a)(1). In Elliott, the Bankruptcy Appellate Panel noted that
this broad definition encompasses property made available to the estate by other provisions of
the Bankruptcy Code including property of the debtor repossessed by a secured creditor. 214
B.R. at 151 (relying on United States v. Whiting Pools, Inc., 462 U.S. 198, 205-207 (1983)).
Specifically, under 11 U.S.C. § 542(a), property of the estate encompasses property in possession
of a third party if the property may be used, sold or leased by a bankruptcy trustee. Id.
Consequently, property lawfully repossessed by a creditor in which the debtor no longer has a
possessory interest at the commencement of the case may still be property of the debtor’s estate
as long as ownership has not been fully transferred. Id. at 151-52.
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The Sixth Circuit Appellate Panel further analyzed Ohio law to determine that full
ownership of a repossessed vehicle is not transferred until sold at auction. Id. at 152. 	Although
a secured creditor may obtain transfer of title upon repossession under Ohio Rev. Code §
4505.10(A), this transfer does not give the secured party full ownership rights in or unrestricted
control over the vehicle. Id. Until the vehicle is actually sold at auction or otherwise disposed of
under applicable Ohio law, a debtor continues to have a right to redeem the vehicle pursuant to
Ohio Rev. Code § 1309.49 (repealed and replaced by substantially similar provisions in Ohio
Rev. Code § 1309.623 and § 1309.624). The Appellate Panel concluded that unless such sale
occurs prior to the bankruptcy filing, the repossessed vehicle may be recovered by the estate and
remains estate property. Id.
Finally, the Sixth Circuit Appellate Panel discussed a Chapter 13 debtor’s power to
modify a repossessing secured creditor’s contractual rights. Citing the supporting decision of the
Sixth Circuit in Federal Land Bank of Louisville v. Glenn (In re Glenn), 760 F.2d 1428 (6 th Cir.
1985), the Appellate Panel concluded that 11 U.S.C. § 1322(b)(2) was written to allow a debtor
to modify the contract rights of a secured creditor in a Chapter 13 plan. Id. A debtor’s power to
modify the rights of a secured creditor with respect to repossessed property is not cut off until
full ownership of the property transfers to the secured creditor. Id. Noting the Ohio law
discussed above, the Appellate Panel concluded that a debtor retains the right to modify a
secured creditor’s contractual rights with respect to repossessed collateral unless that collateral is
sold or otherwise disposed of prior to the bankruptcy filing. Id. at 152-53.
The court recognizes that decisions from other circuits may appear to conflict with
Elliott. Specifically, the Fourth Circuit concluded that upon repossession, a debtor’s rights in the
vehicle may be limited to a right of redemption under Virginia state law, although the court
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stopped short of recognizing repossession as a transfer in ownership. Tidewater Finance Co. v.
Moffett (In re Moffett), 356 F.3d 518 (4th Cir. 2004).
Furthermore, the Eleventh Circuit has held that pursuant to Florida statutory law, the
repossession of a vehicle fundamentally changes the debtor’s property interest in the vehicle.
Bel-Tel Federal Credit Union v. Kalter (In re Kalter), 292 F.3d 1350 (11 th Cir. 2002). The
Eleventh Circuit determined that the prepetition repossession of a vehicle by the secured creditor
transfers ownership of the vehicle to the creditor under Florida law. Id. at 1360. Consequently,
the court concluded that a repossessed vehicle does not become property of the estate under 11
U.S.C. § 541. Id. See also Charles R. Hall Motors, Inc. v. Lewis (In re Lewis), 137 F.3d 1280
(11th Cir. 1998) (construing Alabama law to conclude that a debtor’s interest in a repossessed
vehicle is limited to a right of redemption and this limited right of redemption is the only
property interest that becomes property of the estate upon the debtor’s bankruptcy filing).
It should be noted, however, that the Eleventh Circuit came to an entirely different
conclusion when it examined the impact of a prepetition repossession of a vehicle under Georgia
law. In Motors Acceptance Corp. v. Rozier (In re Rozier), the Eleventh Circuit certified to the
Georgia Supreme Court the issue of whether ownership of collateral passes to a creditor upon
repossession. 376 F.3d 1323 (11 th Cir. 2004). The Georgia Supreme Court concluded that
ownership of the collateral does not pass to the creditor upon repossession, “but remains with the
debtor until the creditor complies with the disposition or retention procedures of the Georgia
UCC.” Id. at 1324 (further citation omitted). As such, the Eleventh Circuit held that under
Georgia law, a repossessed vehicle that has not been sold prior to the bankruptcy filing remains
property of the debtor’s estate and must be returned to the debtor by the repossessing creditor or
that creditor will be in violation of the automatic stay. Id.
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These circuit cases demonstrate nothing more than that a debtor’s rights in a repossessed
vehicle at the time of a bankruptcy filing depends upon state law and state law interpretation that
may vary from state to state. As such, this court is compelled to follow the Sixth Circuit
Bankruptcy Appellate Panel’s lucid interpretation of applicable Ohio statutory law and its
determination that a repossessed vehicle becomes property of a debtor’s estate unless the vehicle
is sold or otherwise disposed of prior to the bankruptcy filing. Elliott, 214 B.R. at 153. See also
Sharon v. TranSouth Financial Corp. (In re Sharon), 234 B.R. 676 (B.A.P. 6 th Cir. 1999) (citing
Elliott to support that a repossessed vehicle that has not been sold prior to the bankruptcy filing
becomes property of the estate and is subject to the automatic stay).
In the case at hand, Tidewater lawfully repossessed the Debtor’s vehicle prior to the
filing of the bankruptcy petition but had not yet obtained a repossession title or disposed of the
vehicle by sale or otherwise. Pursuant to the Bankruptcy Appellate Panel’s determination in
Elliott, the repossessed vehicle remained property of the Debtor’s estate and the Debtor retained
the ability to modify Tidewater’s secured claim in her Chapter 13 plan.
CONCLUSION
Tidewater Finance Company’s lawful repossession of Debtor Laquita Curry’s vehicle
prior to the bankruptcy filing did not terminate the Debtor’s ownership interest in the vehicle or
limit the Debtor’s ability to modify Tidewater’s claim under 11 U.S.C. § 1322(b)(2). For these
reasons, the court denies Tidewater Finance Company’s motion to terminate the automatic stay
and overrules Tidewater Finance Company’s objection to confirmation of the Debtor’s Chapter
13 plan.
SO ORDERED.
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cc:
Laquita D Curry
145 N. Decker Ave.
Dayton, OH 45417
Jeffrey R McQuiston
130 West Second Street
Suite 1818
Dayton, OH 45402-1503
(937) 226-1212
Fax : (937)226-1224
Email: qlaws123@aol.com
James R Sheeran
Matthew M Barnes
Tidewater Finance Company
P.O. Box 13306
Chesapeake, VA 23325-3306
(757) 961-4412
Fax: (757) 579-6425
Jeffrey M Kellner
131 N Ludlow St
Suite 900
Dayton, OH 45402
937-222-7600
Trustee
Asst US Trustee (Day)
Office of the US Trustee
170 North High Street
Suite 200
Columbus, OH 43215-2417
614-469-7411
# # #
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