Dean A Mobley

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UNITED STATES BANKRUPTCY COURT
FOR THE NORTHERN DISTRICT OF OHIO

AUTHENTICATED /

In Re: )
) JUDGE RICHARD L. SPEER
Dean A. Mobley )
) Case No. 12-32247
Debtor(s) )
)
DECISION AND ORDER

Before this Court is the Motion of the Trustee, Ericka S. Parker, for Turnover and to Avoid
Transfer of Personal Property. (Doc. No. 23). Inher Motion, the Trustee requests “an Order directing
the Debtor to turn over the 2006 Titan Sidewinder Motorcycle and title and enter an Order avoiding
the transfer on the title to the vehicle.” Jd. Said motorcycle was, in the time period immediately
preceding the commencement of the Debtor’s bankruptcy case, physically transferred to and titled

in the name of the Debtor’s former spouse, Patricia Mobley.

On the Trustee’s Motion, the Debtor filed a response. In his response, the Debtor partially
objected to the relief sought by the Trustee, setting forth, inter alia, that he “cannot legally return the
cycle due to Ms. Mobley being the title owner.” (Doc. No. 24). The Court, for the reasons set forth

below, finds the position of the Debtor to be well taken.
DISCUSSION

For the first part of her Motion, that for turnover, the Trustee cites to 11 U.S.C. § 542. For
the second portion of her motion, concerning the avoidance of a transfer of personal property, the
Trustee cites to 11 U.S.C. §§ 547 and 548. Each of these parts of the Trustee’s Motion is now

addressed in order.

U.S. GOVERNMENT
INFORMATION
GPO
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In re: Dean A. Mobley
Case No. 12-32247

Section 542 provides a mechanism by which a trustee may obtain control of property for
administration on behalf of a debtor’s bankruptcy estate. In re Richard Osterwalder, 407 B.R. 291,
294 (Bankr.N.D.Ohio 2008). In relevant part, § 542(a) provides:

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, orthat

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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.

A trustee seeking to compel turnover under § 542(a) bears the burden to show that the requirements

of the statute are met. In re DBSI, Inc., 468 B.R. 663, 669 (Bankr. D.Del. 2011).

A trustee’s burden under § 542(a) will be satisfied when the existence of each of these three

elements is established:

(1) the entity against whom turnover is sought was in possession, custody or
control of the property to be turnover;

(2) the property to be turned over is subject to administration by the trustee
(i.e., the trustee may use, sell or lease the property under § 363) or the
property may be exempted by debtor; and

(3) the property to be turned over must be more than an inconsequential value
or benefit to bankruptcy estate.

In re Bailey, 380 B.R. 486, 490 (B.A.P. 6" Cir. 2008). For these requirements of § 542(a), the
Trustee has not met her burden with respect to elements one and two. As now explained, the basis
for this conclusion is derived from this uncontested fact: the motorcycle for which the Trustee seeks
to have the Debtor turnover was, on a prepetition basis, physically transferred to and titled solely in

the name of the Debtor’s ex-wife.

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In re: Dean A. Mobley
Case No. 12-32247

The first element of § 542(a) requires that, before this Court can compel turnover, it must be
shown that the entity against whom turnover is sought is in possession, custody or control of the
property to be turned over. 11 U.S.C. § 542(a). This requirement serves to ensure that the entity
against whom turnover is sought is capable of compliance. Jn re Rood, 459 B.R. 581, 607 (Bankr.
D.Md. 2011). See also Lovald, Trustee v. Falzerano (In re Falzerano), 454 B.R. 81, 86 (8" Cir.

B.A.P. 201 1) (turnover denied where defendants never had possession of property). For her Motion,

the entity against whom turnover is sought is the Debtor.

Compliance with the Trustee’s motion for turnover in this particular case, however, appears
to be a matter beyond the Debtor’s control, with the Debtor, prior to seeking bankruptcy relief,
having relinquished both physical possession and legal title to the motorcycle to his former spouse,
Ms. Mobley.' The motorcycle, thus, cannot be said to be within the Debtor’s possession, custody or

control for purposes of § 542(a).

This is not to say that the Debtor does not have a duty to cooperate with the Trustee. On the
matter of turnover, therefore, the Trustee could seek to use, and apparently has used the Debtor as
an intermediary with Ms. Mobley. 11 U.S.C. § 521; FED.R.BANKR.P. 4002. However, it would
appear in this particular case that the Debtor’s efforts as an intermediary would be futile, as the

following statement, contained in correspondence sent by Debtor’s attorney to the Trustee, shows:

The former Ms. Mobley has indicated that she wanted no part of this. The
cycle was hers. She was not giving it up, and she would make his [the
Debtor’s] life a living hell.

(Doc. No. 31, Ex. B).

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If the Trustee has evidence that the Debtor transferred his interest in his motorcycle for the
purpose of keeping the property beyond the purview of the bankruptcy estate, an action to deny
discharge could be brought. See 11 U.S.C. § 727(a)(2)(A).

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In re: Dean A. Mobley
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However, even assuming, arguendo, that the Debtor could facilitate the delivery to the
Trustee of the motorcycle now owned by his former wife, a more fundamental problem exists
regarding turnover under § 542(a). The second requirement of § 542(a), supra, holds that a trustee
may only seek the turnover of property when the property is subject to administration by the trustee

(i.e., the trustee may use, sell or lease the property under § 363) or the property may be exempted by

be estate property. As this Court previously explained:

Generally, a trustee can only use or sell property of the estate. 11 U.S.C.

§ 363(b)(1). Likewise, a debtor may only exempt property of the estate. 11

U.S.C. § 522(b)(1). Thus, although not specifically stated in § 542,

fundamental to the concept of “Turnover” is that the asset to be turned over

must be property of the debtor’s bankruptcy estate.
Inre Richard Osterwalder, 407 B.R. 291, 294 (Bankr. N.D.Ohio 2008) (internal citations omitted).
see also Inre White, 389 B.R. 693, 699 (B.A.P. 9" Cir. 2008) (“Essential element of a turnover
order, necessarily decided in every turnover ruling, is that the property to be turned over is property

of the bankruptcy estate.”).

As shortly set forth in more detail, the prepetition transfer made by the Debtor of his
motorcycle to his former spouse, Ms. Mobley, means that the Debtor’s bankruptcy estate does not,
at the present, have an interest in the vehicle. As such, the Trustee has no authority to administer the
property, thus depriving the Trustee of any basis to obtain — as property she can use, sell or lease
under § 363 — the turnover of the property under § 542(a). The estate’s present lack of interest in Ms.

Mobley’s motorcycle is a consequence of the underlying nature of estate property.

At the commencement of a bankruptcy case, generally all interests held by a debtor in
property become encompassed within a bankruptcy estate. 11 U.S.C. § 541(a). Conversely, if a

debtor does not, when a case is commenced, hold an interest in property, the estate gains no interest

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In re: Dean A. Mobley
Case No. 12-32247

in the property. Whether a debtor actually has an interest in property is a matter determined by
applicable nonbankruptcy law,” in this case Ohio law, since the motorcycle at issue is titled under

Ohio law.

With regards to motor vehicles, including motorcycles, Ohio is a certificate of title state.

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O.R.C. § 4505.04. As a certificate of title state, Ohio law generally proscribes a court from
recognizing the interest of any person in or to any motor vehicle unless it is evidenced by a certificate

of title. In relevant part, O.R.C. § 4505.04 sets forth:

(A) No person acquiring a motor vehicle from its owner, whether the owner
is a manufacturer, importer, dealer, or any other person, shall acquire any
right, title, claim, or interest in or to the motor vehicle until there is issued to
the person a certificate of title to the motor vehicle, .. .

(B) .. . no court shall recognize the right, title, claim, or interest of any
person in or to any motor vehicle sold or disposed of, or mortgaged or
encumbered, unless evidenced:

(1) By a certificate of title, ...

In this case, these facts are not in dispute: (1) on April 9, 2012, acertificate of title was issued
regarding the motorcycle for which the Trustee now seeks turnover; (2) in this certificate of title, Ms.
Mobley was denominated as the sole owner of the vehicle; and (3) subsequently, on May 11, 2012,
the Debtor sought relief in this Court under Chapter 7 of the Bankruptcy Code. Based, therefore,
upon an application of O.R.C. § 4505.04, it follows from these facts that, when he filed for
bankruptcy relief, the Debtor had no interest in Ms. Mobley’s motorcycle. As a consequence, the

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Butner v. U.S., 440 U.S. 48, 54, 99 S.Ct. 914, 918, 59 L.Ed.2d 136 (1979) (“. . . Congress has
generally left the determination of property rights in the assets of a bankrupt’s estate to state
law.”).

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In re: Dean A. Mobley
Case No. 12-32247

Debtor’s bankruptcy estate likewise has no interest in Ms. Mobley’s motorcycle, thereby insulating

the vehicle from the Trustee’s Motion for turnover under § 542(a).

A couple of points regarding turnover are, at this juncture, in order. First, turnover under

§ 542 describes only the power of a trustee to force persons holding property of the bankruptcy estate

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to turn that property over to the estate; it does not define the interest of the estate in that property.
Similarly, an action brought under § 542 for turnover cannot be used as a method to determine
disputed rights of parties to property; rather, turnover is a limited remedy for a trustee to obtain what
is acknowledged to be property of the bankruptcy estate. 11 U.S.C.A. § 542(a). In re Hechinger
Investment Co. of Delaware, Inc., 282 B.R. 149, 161-62 (Bankr. D. Del. 2002).

The deficiencies in the Trustee’s Motion for Turnover also cannot be sidestepped by the
Trustee simply substituting Ms. Mobley, in the stead of the Debtor, as the party against whom
turnover is sought under § 542(a). Pursuant to Bankruptcy Rule 7001(1), if an action is brought by
a trustee against a nondebtor party for turnover, it must be maintained through an adversary
proceeding, not by way of a motion. See Camaill Co. v. Steadfast Ins. Co. (In re Camall Co.), 16
Fed. Appx. 403, 407 (6™ Cir.2001) (“Courts have given effect to Bankruptcy R. 7001 by holding that
‘a turnover proceeding commenced by motion . . . will be dismissed.’”), citing In the Matter of
Thomas J. Perkins, Jr., 902 F.2d 1254, 1258 (7" Cir.1990). Accordingly, for all these reasons, the

Trustee’s Motion for Turnover under § 542(a) must be denied.

The Court now turns to address the second part of the Trustee’s Motion, concerning the
avoidance of the Debtor’s transfer of his motorcycle to Ms. Mobley. In certain situations, property,
although not first encompassed in a debtor’s bankruptcy estate, may be subsequently brought within
the bankruptcy estate through the use of certain avoiding powers conferred upon a trustee. In this
matter, the Trustee, in the second part of her Motion, cites to two avoiding powers as a basis to

recover the motorcycle now owned by Ms. Mobley: (1) 11 U.S.C. § 547, concerning preferential

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In re: Dean A. Mobley
Case No. 12-32247

transfers; and (2) 11 U.S.C. § 548, regarding fraudulent transfers. If successful on either of these
actions, the avoided transfer is preserved for the benefit of the Debtor’s bankruptcy estate. 11 U.S.C.
§ 551.

At this point, however, the merits of the Trustee’s actions under both § 547 and § 548 cannot

be addressed. Again, as with an action against a nondebtor party for turnover, Bankruptcy Rule
7001(1) requires that an action to avoid a transfer under either § 547 or 548 must by brought by way
of an adversary proceeding, not by way of motion. Jn re Value Music Concepts, Inc., 329 B.R. 111,
117 (Bankr. N.D. Ga. 2005). This is necessary aspect of due process. See Havoco of Am., Lid. v.
Hill, 197 F.3d 1135, 1139-40 (11™ Cir.1999) (fraudulent conveyance had to be brought via an
adversary proceeding in which wife was joined as defendant, in order to protect wife’s due process
rights). Consequently, until an adversary proceeding is brought, the Court cannot address the

Trustee’s claims under Bankruptcy Code §§ 547 and 548.

For all these reasons, the Motion of the Trustee for Turnover and to Avoid Transfer of
Personal Property, cannot be Granted. In reaching the conclusions found herein, the Court has
considered all of the evidence, exhibits and arguments of counsel, regardless of whether or not they

are specifically referred to in this Decision.

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In re: Dean A. Mobley
Case No. 12-32247

Accordingly, it is

ORDERED that the Motion of the Trustee, Ericka S. Parker, for Turnover and to Avoid
Transfer of Personal Property, (Doc. No. 23), be, and is hereby, DENIED.

Dated: December 6, 2012

Lh fh

Richard L. Speer
United States
Bankruptcy Judge

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CERTIFICATE OF SERVICE

Copies were mailed this 6th day of December, 2012 to:

Dean A Mobley
1611 Westgate
Defiance, OH 43512

James E Hitchcock
..650-W.1st-St..

Defiance, OH 43512

Ericka S Parker
232 10th Street
Toledo, OH 43604

/s/Diana Hernandez
Deputy Clerk, U.S. Bankruptcy Court

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