JIM D. PAPPAS, Bankruptcy Judge.
When chapter 7
The chapter 7 case trustee in Debtor's bankruptcy case, Jeremy Gugino ("Trustee"), filed this adversary proceeding against Jones for either turnover of possession and title to the Home pursuant to § 542(a), or avoidance of a § 549(a) unauthorized postpetition transfer of Debtor's ownership interest in the Home. Jones contests Trustee's claims, asserting (1) Bruckner had the legal authority to transfer the Home to him, despite the pendency of Debtor's bankruptcy estate, simply because of her status as the alternate owner on the Home's title;
A trial in this adversary proceeding was held October 7, 2011, and the Court took the issues under advisement. Having considered the record and evidence, the parties' submissions, and applicable law, this Memorandum constitutes the Court's findings of fact and conclusions of law. Rules 7052, 9014.
Bruckner purchased the Home in 2006, and, shortly thereafter, applied for and obtained an Idaho certificate of title for the Home listing "Frances W. Bruckner OR Jacqueline M. Antonie" as owners.
Debtor filed a chapter 7 bankruptcy case in June 2009. In August 2009, Trustee commenced an adversary proceeding against Bruckner seeking a declaratory judgment that Debtor held an ownership interest in the Home when she filed her petition, and, as a result, that the Home became property of Debtor's bankruptcy estate ("Debtor's Estate"). Adv. No. 09-6046, Dkt. No. 1. However, the trial in that adversary proceeding was stayed when Bruckner filed her own chapter 7 petition on January 6, 2010. See Bankr. No. 10-00022, Dkt. No. 1.
In response to Bruckner's bankruptcy filing, Trustee amended his adversary complaint, substituting the "Bankruptcy Estate of Frances W. Bruckner," (the "Bruckner Estate") as defendant instead of Bruckner. Adv. No. 09-6064, Dkt. No. 13. In the amended complaint, Trustee again sought a declaratory judgment that the Home was property of Debtor's Estate. Id. at 4. The chapter 7 trustee in Bruckner's case, Richard E. Crawforth, declined to answer the complaint, and Trustee moved for, and obtained, a default judgment against the Bruckner Estate on February 22, 2010. Adv.
No. 09-6064, Dkt. Nos. 17, 18. The default judgment provides, in part:
Adv. No. 09-6064, Dkt. No. 18.
Bruckner's bankruptcy case was closed on July 2, 2010. Bankr. No. 10-00022, Dkt. No. 22. By that time, Trustee had not sold the Home, and Bruckner remained in possession of the title certificate which bore her name an alternate owner. Sometime thereafter, Bruckner assigned the Home's title to Jones, he took possession of the certificate, and applied for a new title. The State issued a new title certificate, naming Jones as the Home's sole owner, on August 27, 2010. Exh. 102.
Upon learning that the State had issued a new title certificate in favor of Jones, Trustee filed this adversary proceeding, seeking to avoid the transfer of the Home's title by Bruckner to Jones pursuant to § 549(a); or, in the alternative, seeking an order that the Home and its title are property of Debtor's Estate, and that, pursuant to § 542(a), the Home should be turned over to Trustee and the Home's title should be turned over and endorsed to "Jeremy J. Gugino, Bankruptcy Trustee for Case No. 09-01569-JDP." Complaint at 4, Dkt. No. 1.
Upon the filing of a bankruptcy petition, "all legal or equitable interests of the debtor in property as of the commencement of the case" become property of the debtor's bankruptcy estate. § 541(a)(1). The determination of whether a debtor owns an interest in property upon a bankruptcy filing is made by resort to nonbankruptcy law. Butner v. United States, 440 U.S. 48, 55 (1979); California v. Farmers Mkts., Inc. (In re Farmers Mkts., Inc.), 792 F.2d 1400, 1402 (9th Cir. 1986).
This Court has reviewed Idaho's motor vehicle titling statutes on several occasions. See, e.g., In re Woods, 386 B.R. 758, 761-62 (Bankr. D. Idaho 2008); Hopkins v. Brasseaux (In re Saunders), 08.1 I.B.C.R. 16, 17 (Bankr. D. Idaho 2008); Gugino v. Knezevich (In re Pegram), 395 B.R. 692, 695-96 (Bankr. D. Idaho 2008). Under this case law, if a debtor is listed as a vehicle's owner on its Idaho certificate of title when she files for bankruptcy, her interest in the vehicle becomes property of her bankruptcy estate. See In re Woods, 386 B.R. at 761-62.
That result is the same where a debtor is listed as a vehicle's alternate owner on its Idaho certificate of title when she files for bankruptcy. See In re Saunders, 08.1 I.B.C.R. at 17. As alternate owners, each party on an "OR" motor vehicle title has the ability to unilaterally transfer complete ownership of the vehicle to another. See Idaho Code § 49-502; Latham Motors, Inc. v. Phillips, 851 P.2d 985, 991-92 (Idaho Ct. App. 1992); see also DUPLICATE IDAHO TITLE APPLICATION WITH OWNERSHIP TRANSFER form at 2, available at http://itd.idaho.gov/dmv/vehicleservices/ documents/3369.pdf (last visited Nov. 15, 2011) (`If more than one owner of record is shown on the current title, any owner may sign if their names are connected by `OR', but all must sign if their names are connected by `AND'."). When one alternate owner of a vehicle files a bankruptcy petition,
Debtor was one of the Home's alternate owners when she filed her bankruptcy case. Thus, the Home's ownership interests, including the ability to unilaterally transfer the Home, became property of Debtor's bankruptcy estate. Once property enters a debtor's bankruptcy estate, the only party permitted to administer that property is the case trustee. § 323(a); see Zavala v. Wells Fargo Bank, N.A. (In re Zavala), 444 B.R. 181, 189 (Bankr. E.D. Cal. 2011). When Debtor's interests in the Home became property of her bankruptcy estate, only Trustee could exercise Debtor's right to transfer the Home to another. Because Debtor and Bruckner were alternate owners on the Home's title, Trustee's sole ability to administer the Home, including his sole ability to transfer the Home's title, means that, at least during the pendency of Debtor's bankruptcy case,
This should come as no surprise to Bruckner as the allocation of interests in the Home, as between Debtor's bankruptcy estate and Bruckner's bankruptcy estate, had been detailed in the default judgment issued in Gugino v. Bankruptcy Estate of Frances W. Bruckner. As relevant here, the default judgment provided that Trustee could sell the Home, and Bruckner's trustee could not.
When Bruckner's bankruptcy case closed, Bruckner, at most, received only those interests that were property of her estate at that time. See DeVore v. Marshack (In re DeVore), 233 B.R. 193, 197 (9th Cir. BAP 1998) (interpreting § 554, and finding that a "technical abandonment" under § 554(c) only deems "scheduled property of the estate that is unadministered at the close of the case" as abandoned to the debtor. (emphasis added)). Because the Home was not property of Bruckner's estate when her bankruptcy case closed, she did not gain the ability to transfer the Home's title through that process. Bruckner did not have the ability to transfer the Home's title during the pendency of Debtor's bankruptcy case, and her attempted transfer to Jones in August 2010, had no legal effect and is void. See Lowe v. Sanflippo (In re Schmidt), 362 B.R. 318, 321 (Bankr. W.D. Tex. 2007) (citing Simpson v. Penner, 36 F.3d 450, 452-53 (5th Cir. 1994) ("[O]ne cannot transfer what one does not have.").
In sum, no post-petition transfer occurred under these facts, and the Court need not proceed with a § 549(a) post-petition transfer analysis.
While Trustee is not entitled to a judgment "avoiding" Bruckner's transfer of the Home's title to Jones, that transaction, as noted above, was nonetheless a legal nullity. However, Trustee's complaint also seeks a judgment "compelling [Jones] to transfer title in the Home to `Jeremy J. Gugino, Bankruptcy Trustee for Case No. 09-01569-JDP'" and for turnover of "possession and title to the Home." Complaint at 4, Dkt. No. 1. Section § 542(a) provides that "an entity . . . in possession, custody, or control [of] property [of the bankruptcy estate] shall deliver [it] to the trustee."
In resisting Trustee's claim for turnover of possession and title to the Home, Jones, for some reason, contends this action is not a "core proceeding."
As noted, Jones' conclusion that the Home was removed from Debtor's bankruptcy estate via the Bruckner assignment of the title is simply incorrect. Regardless, determinations by the bankruptcy court of the nature and extent of the property of a debtor's bankruptcy estate, and for turn over of that property to the trustee, are essential to the administration of the bankruptcy estate and are quintessentially core proceedings. 28 U.S.C. § 157(b)(2)(A), (E), and (O); see also Johnston Envtl. Corp. v. Knight (In re Goodman), 991 F.2d 613, 617 (9th Cir. 1993) (explaining that determining the nature and extent of a debtor's estate is a "fundamental function[] of the bankruptcy court"). To the extent the purpose of Jones' core/non-core argument is to challenge Trustee's authority to obtain a turnover order, or this Court's authority to grant that request, his contention is ill-conceived and lacks any merit.
Consistent with the provisions of the Code, the Court will order Jones to deliver the Home's title certificate to Trustee, endorsed as he has requested.
Bruckner lacked any legal authority to transfer the Home's title to Jones because, as between the alternate owners, that ability became and remained property of Debtor's bankruptcy estate, exercisable solely by Trustee. Therefore, Bruckner's attempted transfer of the Home's title had no legal effect, and there is no § 549(a) transfer subject to avoidance under these facts. However, because the Home is property of Debtor's bankruptcy estate, and Jones lacks any legal rights in the Home, the Court will order Jones to surrender a properly-endorsed title certificate to Trustee pursuant to § 542(a). Because Jones does not have physical possession of the Home, the Court declines to order him to deliver possession of the Home to Trustee.
A separate judgment will be entered.
