Bank of Kentucky, Inc v. Ruhe

UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF OHIO
WESTERN DIVISION
In Re
DANIEL JOSEPH RUHE
Debtor
THE BANK OF KENTUCKY,
INC.
Plaintiff
vs.
DANIEL JOSEPH RUHE
Defendant
:
:
:
:
:
:
:
:
:
Case No. 04-11202
Chapter 7
Judge Hopkins
Adversary Case No. 04-1142
In Re
DANNY ALBERT RUHE
Debtor
THE BANK OF KENTUCKY,
INC.
Plaintiff
vs.
DANNY ALBERT RUHE
Defendant
:
:
:
:
:
:
:
:
:
Case No. 04-10168
Chapter 7
Judge Hopkins
Adversary Case No. 04-1135
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: June 21, 2005
____________________________________________________________
Case 1:04-ap-01135 Doc 29 Filed 06/21/05 Entered 06/21/05 10:25:42 Desc Main
Document Page 1 of 4

2
MEMORANDUM OF DECISION ON ORDER
DENYING MOTIONS FOR SUMMARY JUDGMENT
The above-captioned adversary proceedings are being jointly administered for
procedural purposes. Presently before the Court are summary judgment motions
filed by the Plaintiff, The Bank of Kentucky, Inc. (“the Bank”). See 04-1142 at
Doc. 26; 04-1135 at Doc. 21. Because genuine issues of material fact exist in both
proceedings, the Bank’s motions will be denied.
The Ruhes were principal stockholders of a truck dealership known as Mid-
West Truck Center, Inc. (“MWTC”). MWTC obtained financing from the Bank
and secured the same with a blanket security interest in, among other things, all
inventory and equipment. As further security, the Ruhes executed personal
guarantees. Sometime in 2002, an inventory sale was conducted and MWTC was
closed. The Bank alleges that the Ruhe’s debt is nondischargeable because its
collateral was sold “out of trust in violation of the [Bank’s] security interest.”
The Bank seeks summary judgment under 11 U.S.C. § 523(a)(4) and/or (6).
Both Ruhes have filed a response in opposition with a supporting affidavit.
1. Section 523(a)(4)
The Bank’s 523(a)(4) claims are predicated upon embezzlement.
Embezzlement, however, requires proof that the allegedly misappropriated property
was owned by the plaintiff and not the debtor. See Brady v. McAllister (In re
Brady), 101 F.3d 1165, 1173 (6th Cir. 1996) (“A creditor proves embezzlement by
showing that he entrusted his property to the debtor[.]”) (emphasis added). For
purposes of § 523(a)(4), “[o]ne cannot embezzle one’s own property.” Belfry v.
Cardozo (In re Belfry), 862 F.2d 661, 662 (8th Cir. 1988),
In the instant proceedings, there is no proof that the trucks or the proceeds
from their sale were owned by the Bank. Attached to each complaint as “Exhibit
B” is a copy of the first page of the security agreement between the Bank and
MWTC. The first page does not reflect any interest held by the Bank other than a
security interest, not an ownership interest.
Case 1:04-ap-01135 Doc 29 Filed 06/21/05 Entered 06/21/05 10:25:42 Desc Main
Document Page 2 of 4

1 The security agreement attached to the complaints reflects that the document is two pages in length. It
may be that page two contains language that would create the necessary ownership interest. Because it is not part of
the record, there exists a genuine issue of material fact.
3
The facts in these proceedings are similar to those in Chrysler First
Commercial Corp. v. Nobel (In re Nobel), 179 B.R. 313 (Bankr. M.D. Fla. 1995).
In Nobel, the plaintiff was a floor plan financier seeking relief for embezzlement
under § 523(a)(4) on the basis that the debtor sold its collateral out of trust. After
scrutinizing the parties’ security agreement, the court concluded as follows:
[T]his Court is disinclined to accept the proposition that funds obtained
by the sale of goods subject to a floor plan are properties of the floor
plan financier unless the floor plan expressly provides for the
segregation of the funds to be held in trust by the debtor. Absent an
express provision that the sale proceeds are held in trust, the floor plan
financier's interest is nothing more than a security interest on the
vehicle covered by the floor plan and, if the agreement provides, on the
proceeds obtained from the sale by the dealer.
Id. at 315.
Because the record does not reflect that the Bank possesses anything more than
a security interest, summary judgment is not appropriate at this time.1
2. Section 523(a)(6)
The § 523(a)(6) exception is limited to "a deliberate or intentional injury, not
merely a deliberate or intentional act that leads to injury." Kawaauhau v. Geiger,
118 S. Ct. 974, 977 (1998). The Sixth Circuit has elaborated on the Geiger standard
as follows:
Although the Supreme Court identified a logical association between
intentional torts and the requirements of § 523(a)(6), it neither expressly
adopted nor quoted that portion of the Restatement discussing
"substantially certain" consequences. Nonetheless, from the Court's
language and analysis in Geiger, we now hold that unless "the actor
Case 1:04-ap-01135 Doc 29 Filed 06/21/05 Entered 06/21/05 10:25:42 Desc Main
Document Page 3 of 4

4
desires to cause [the] consequences of his act, or believes that the
consequences are substantially certain to result from it" he has not
committed a "willful and malicious injury" as defined under
§ 523(a)(6).
Markowitz, 190 F.3d at 464 (quoting Restatement (Second) of Torts § 8A, at 15
(1964)).
In general, it is difficult to prevail on summary judgment when issues of
subjective intent are involved. See Perry v. McGinnis, 209 F.3d 597, 600 (6th Cir.
2000). Based upon the nature of the action and the affidavits filed by the Ruhes, the
Court believes that there are factual issues under § 523(a)(6) that are better left for
trial. See Nobel, 179 B.R. at 316 (“[C]onsidering the element of intent involved in
[a § 523(a)(6)] claim, this Court is satisfied that resolution of this claim by summary
judgment is inappropriate.”).
CONCLUSION
For the foregoing reasons, the summary judgment motions will be DENIED.
An order to this effect will be entered.
Copies to:
Dennis R. Williams
DWilliams@aswdlaw.com
Richard Boydston
rb2@gdm.com
Robert A. Goering
robertg@fuse.net
U.S. Trustee
ustpregion09.ci.ecf@usdoj.gov
Case 1:04-ap-01135 Doc 29 Filed 06/21/05 Entered 06/21/05 10:25:42 Desc Main
Document Page 4 of 4