Thomas J. Tucker, United States Bankruptcy Judge
This case is before the Court on two competing motions: (1) a motion by Michael Jones, Court Officer, entitled "Motion to Set Aside Order Dated 10/31/2012 (Docket # 21)" (Docket # 22, the "Court Officer Motion"); and (2) a motion by the Debtor entitled "Debtor's Motion for Sanctions and to Enforce October 31, 2012 [Order] to Return 2002 Suzuki Motorcycle to Debtor" (Docket # 23, the "Debtor's Motion")(collectively, the "Motions"). In a previous written opinion addressing these Motions (the "Previous Opinion"), the Court decided certain issues of law, and concluded that an evidentiary hearing was required. See In re Dixon, 500 B.R. 869 (Bankr.E.D.Mich.2013).
The Court has considered the testimony presented and the exhibits admitted into evidence at the evidentiary hearing, and the arguments of counsel. For the reasons stated in this opinion, the Court will enter an order granting the Court Officer Motion, and denying the Debtor's Motion.
The Court stated the following background, and the following facts, in its Previous Opinion, and reiterates them now.
After the parties timely filed their briefs, the Court issued its Previous Opinion, which is discussed further below.
The Court reiterates and again adopts what it said in its Previous Opinion, about this Court's subject matter jurisdiction and the core nature of this contested matter:
In the Previous Opinion, the Court decided the following question of Michigan law: "when a judgment creditor causes a motorcycle to be sold at an execution sale, what events must occur before ownership of the motorcycle changes from the judgment debtor to the purchaser?"
The Court's Previous Opinion quoted from the leading Sixth Circuit case on the voidability of post-petition acts that violate the automatic stay, Easley v. Pettibone Michigan Corp., 990 F.2d 905, 911 (6th Cir. 1993):
After discussing Michigan law and the parties' arguments, this Court held that the Michigan Vehicle Code, rather than Michigan's version of Article 2 the Uniform Commercial Code, governed the question presented. And the Court held that in this situation, involving an execution auction sale, and thus a transfer of the Debtor's motorcycle "by operation of law," Michigan law is as follows:
This Court then held that:
In the Previous Opinion, the Court explained why an evidentiary hearing was necessary:
The Court stands by all of its holdings in the Previous Opinion.
At the evidentiary hearing, the Debtor presented testimony of one witness, Rick Luczak, and by agreement of the parties, the Court admitted into evidence the Debtor's Exhibits A through D, and the Court Officer's Exhibits 1 through 4. Because the Debtor's exhibits and the Court Officer's exhibits are the same, the Court will cite only the Debtor's exhibits in this opinion. Counsel for the Court Officers Michael Jones and Victor Lotycz (the "Court Officers") presented no witnesses, and asked no questions of the Debtor's witness Rick Luczak.
As noted above, Rick Luczak is the person who successfully bid on the Debtor's motorcycle at the auction sale. Mr. Luczak purchased the motorcycle in the name of his business, "R J Luczak Enterprises."
From these facts it is clear that two of the three events needed under Michigan law to transfer ownership of the motorcycle to the purchaser Mr. Luczak occurred before the Debtor filed his bankruptcy petition at 4:44 p.m. on September 12, 2012 — namely, (1) "delivery" of the motorcycle to the purchaser Mr. Luczak; and (2) "the transfer, sale, or assignment of the title or interest in a motor vehicle by a person," Mich. Comp. Laws § 257.233(9), by the Court Officer having concluded the auction and accepted Mr. Luczak's winning bid, and giving Mr. Luczak a signed bill of sale for the motorcycle (DX-B). Because these actions occurred before the bankruptcy petition was filed and the automatic stay arose under 11 U.S.C. § 362(a), none of these actions was a violation of the automatic stay.
The third event that had to occur under Michigan law before ownership of the motorcycle changed to Mr. Luczak, however, did not occur until later on September 12, after the Debtor filed his bankruptcy petition at 4:44 p.m. That third event is the "signature" on "either the application for title or the assignment of the certificate of title by the purchaser, transferee, or assignee." Mich. Comp. Laws § 257.233(9). As the statute says, it is "the date of" that signature that is the "effective date of the transfer of title or interest in the vehicle.")
The Bill of Sale that the Court Officer signed and gave to Mr. Luczak right after the auction sale concluded, DX-B, was not signed by Mr. Luczak, who was "the purchaser, transferee, or assignee" within the meaning of § 257.233(9). Nor was that Bill of Sale either an "application for title" or an "assignment of the certificate of title" within the meaning of § 257.233(9). And in this case, there was no "assignment of the certificate of title." Rather, there was only an "application for title" that Mr. Luczak made to the Michigan Secretary of State. That application for title is in the form of the document that appears as the second page of DX-A, a document entitled "Statement of Vehicle Sale," which was signed by "the purchaser" Mr. Luczak as required by § 257.233(9).
Because these actions by Mr. Luczak occurred after Debtor's bankruptcy petition was filed, they were in violation of the automatic stay. See e.g., 11 U.S.C. § 362(a)(3) (automatic stay, "applicable to all entities," of "any act ... to exercise control over property of the [bankruptcy] estate"). And the ownership of the Debtor's motorcycle did not change from the Debtor (and upon filing of the bankruptcy petition, the bankruptcy estate); to the purchaser Mr. Luczak until after the bankruptcy petition was filed and the automatic stay had arisen. At the moment the Debtor filed his bankruptcy petition at 4:44 p.m. on September 12, 2012, the motorcycle therefore became property of the bankruptcy estate, under 11 U.S.C. § 541(a)(1), subject to the Debtor's claimed exemption in the motorcycle.
At the evidentiary hearing, counsel for the Court Officers argued that when the Court Officer Mike Jones gave Mr. Luczak the signed Bill of Sale (Ex. B), that completed the sale and transferred the ownership of the motorcycle to the purchaser Mr. Luczak. In support of this argument, counsel cited the case of Perry v. Golling Chrysler Plymouth Jeep, Inc., 477 Mich. 62, 729 N.W.2d 500 (2007), and Mich. Comp. Laws § 257.236a(2).
Neither the Perry case nor § 257.236a(2) supports the Court Officers' argument here. The cited statute merely imposes a duty upon the transferee who purchases a motor vehicle at an execution sale, to "promptly mail or deliver to the secretary of state the last certificate of title, if the transferee has possession of the certificate, the application for a new certificate of title in the form prescribed by the secretary of state, and a certification upon a form prescribed by the secretary of state, made by the officer of the court who conducted the sale, setting [forth] the date of the sale, the name of the purchaser, [and certain other information]." Mich. Comp. Laws § 257.236a(2). In this case the Bill of Sale given by the Court Officer to Mr. Luczak at the auction, DX-B, was a "certification ... made by the officer of the court who conducted the sale," as required by the statute just quoted. And the "Statement of Vehicle Sale" document prepared and signed by Mr. Luczak, DX-A, was Mr. Luczak's "application for a new certificate of title" referred to in the statute. But nothing in this statute says when a transfer of ownership of a vehicle that is sold at an execution sale is deemed effective. Only § 257.233(9) speaks to that, as the Court has previously ruled.
Similarly, the Perry case does not support the Court Officers' argument. That case concerned a prior version of § 257.233(9), which stated that the effective date of a transfer of interest in a vehicle is "the date of execution of either the application for title or the assignment of the certificate of title." The Perry court held that the "execution" of the application is deemed to occur when the transferee signs the document, rather than
The Court next will address a new argument that was made for the first time by Debtor's counsel during the evidentiary hearing. Debtor argued that the application for title that Mr. Luczak sent to the Secretary of State was defective. This is so, Debtor argues, because neither Mr. Luczak's application for title, DX-B, nor any other document submitted by Mr. Luczak to the Michigan Secretary of State when he applied for title of the motorcycle, contained an odometer reading statement for the motorcycle signed by the "transferor," as required by Mich. Comp. Laws § 257.233a(1). But that statutory requirement does not apply to a transfer of a "vehicle that is 10 years old or older." Mich. Comp. Laws § 257.233a(5)(c). The motorcycle in question is a model year 2002 Suzuki motorcycle, as shown by DX-A and B, and the Debtor presented no evidence that at the time of the 2012 auction sale the motorcycle was less than 10 years old. For these reasons, the Court rejects the Debtor's argument that a missing odometer statement signed by the "transferor" was required in order to validly transfer ownership of the motorcycle to Mr. Luczak.
For the reasons stated above, the Court finds that neither of the Court Officers, Mike Jones and Victor Lotycz, violated the automatic stay by any actions they took relating to the auction sale of the Debtor's motorcycle. All of the actions that they took, as part of the sale process leading to the change in ownership of the motorcycle to Mr. Luczak, were done before the bankruptcy petition was filed and before the automatic stay arose. After Court Officer Jones concluded the auction, accepted Mr. Luczak's bid, gave him a signed Bill of Sale for the motorcycle (DX-B) and gave him possession of the motorcycle — all of which occurred before the Debtor filed bankruptcy at 4:44 p.m. on September 12, 2012 — there was nothing more that Court Officer Jones could have done either to facilitate the completion of the change of ownership of the motorcycle, or to try to prevent that change of ownership from occurring. Rather, at the time the bankruptcy petition was filed, the only thing remaining to occur, in order for the ownership of the motorcycle to change to Mr. Luczak, was Mr. Luczak's signature on the application for title (DX-A). While that event occurred after the filing of the bankruptcy petition, no later than 7:00 p.m. on September 12, 2012, that was an act done only by the purchaser Mr. Luczak, which involved no action or participation by either of the Court Officers. Nor did the Court Officers have any ability or authority to prevent Mr. Luczak from taking his actions after the bankruptcy petition was filed, or to unilaterally "undo"
Because the Court Officers did nothing whatsoever that constituted a violation of the automatic stay in this bankruptcy case, no relief of any kind could or should have been ordered against them by this Court for any violation of the automatic stay.
With respect to Mr. Luczak, the Court has found that his action in signing the application for title was a violation of the automatic stay. But the Court concludes that it should not order any relief against Mr. Luczak for his stay violation.
First, the Debtor presented no evidence at the evidentiary hearing that either the Debtor or anyone else made Mr. Luczak aware that the Debtor had filed bankruptcy, before Mr. Luczak signed the application for title, no later than 7:00 p.m. on September 12, 2012. Mr. Luczak was the only witness who testified at the evidentiary hearing, and he testified that he did not recall the Debtor telling him that he had filed bankruptcy, at any time at or after 4:44 p.m. on September 12, 2012, and before Mr. Luczak signed the application for title.
For the reasons stated in this opinion, the Court concludes that it must grant the Court Officers' motion to vacate the Voiding Order, by which this Court initially declared the sale of the motorcycle to be void, and ordered that the motorcycle be returned to the Debtor. This result is further supported by the fact that the motion filed by the Debtor, upon which the Court granted the Voiding Order originally, misstated several important facts — namely, it clearly implied, in ¶¶ 4 and 5, that the Court Officer conducted the auction sale after the Debtor had actually filed his bankruptcy petition; and in ¶ 7, it stated that the Court Officer "transferred the title to the buyer on September 14, 2012 along with the Bill of Sale."
With respect to the Debtor's motion seeking sanctions against Court Officer Mike Jones and Rick Luczak, including sanctions for their alleged violation of the Voiding Order by failing to return the motorcycle to the Debtor, the Court finds that such relief is inappropriate under the circumstances. First, the Voiding Order now is being vacated as having been erroneously entered. Second, the Court Officers did not simply ignore the Voiding Order; rather, promptly after the Voiding Order was entered, Officer Jones filed his motion to set aside the Voiding Order. Third, even if the Court Officer or Mr. Luczak could be found to have disobeyed the Voiding Order by failing to return the motorcycle to the Debtor, the Court has discretion not to sanction them, and will exercise that discretion by refusing to grant any sanctions or other relief in favor of the Debtor. See Johnston Environmental Corp. v. Knight (In re Goodman), 991 F.2d 613, 620-21 (9th Cir.1993)(sanctions under the bankruptcy court's civil contempt powers is permissive and discretionary, not mandatory); cf. In re Perviz, 302 B.R. 357, 370 & n. 4 (Bankr.N.D.Ohio 2003) (citations omitted)("[a] creditor found in contempt of violating the discharge injunction, is, in the court's discretion, subject to sanctions" and that "awarding damages for contempt under [11 U.S.C.] § 524(a) is ... discretionary").
To the extent the Court Officer Motion seeks sanctions against the Debtor in the form of an award of attorney fees and costs, the Court in its discretion will deny that request. The Court concludes that such relief is unwarranted.
For the reasons stated in this opinion, the Court will enter an order granting the Court Officer Motion, and denying the Debtor's Motion.
