THOMAS J. TUCKER, Bankruptcy Judge.
This Chapter 7 case requires to Court to decide 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 question just noted is important in this case because the Debtor's motorcycle was sold at an execution sale, by auction, on the day the Debtor filed this bankruptcy case. The Debtor contends that the sale was a violation of the automatic stay under 11 U.S.C. § 362(a), and therefore is voidable, because the sale occurred after the bankruptcy petition was filed.
The Debtor in this case filed his voluntary Chapter 7 bankruptcy petition on September 12, 2012 at 4:44 p.m. Before he did so, a judgment creditor caused an execution seizure of the Debtor's 2002 Suzuki motorcycle. An execution sale was noticed for September 12, 2012 at 4:00 p.m. Court Officer Victor Lotyz conducted the sale, assisted by Court Officer Michael Jones. It is undisputed that the Court Officer began and ended the public auction of the motorcycle minutes before Debtor filed his bankruptcy petition, and, therefore, before the automatic stay arose under 11 U.S.C. § 362(a). It is also undisputed that the successful (and only) bidder at the sale was R.J. Luczak Enterprises, whose President is Rick Luczak.
On October 10, 2012, Debtor filed a motion to void the sale and to compel the return of the motorcycle to him.
On November 5, 2012, Court Officer Michael Jones filed a motion to vacate the November 1 Order. Debtor then filed, on
The Court held a hearing on these motions on December 5, 2012. The Court ordered the Debtor and the Court Officer to file post-hearing briefs on the issue of "when the execution sale by auction of Debtor's 2002 Suzuki motorcycle was complete and final." The parties timely filed their briefs.
This opinion addresses the issue briefed, in part, by answering the legal question posed at the beginning of this opinion. And given the Court's answer to that legal question, the Court concludes that an evidentiary hearing is required in order to fully resolve the motions.
This Court has subject matter jurisdiction over this bankruptcy case and this contested matter under 28 U.S.C. §§ 1334(b), 157(a) and 157(b)(1), and Local Rule 83.50(a) (E.D.Mich.). This is a core proceeding under 28 U.S.C. § 157(b)(2)(O).
This proceeding also is "core" because it falls within the definition of a proceeding "arising under title 11" and of a proceeding "arising in" a case under title 11, within the meaning of 28 U.S.C. § 1334(b). Matters falling within either of these categories in § 1334(b) are deemed to be core proceedings. See Allard v. Coenen (In re Trans-Industries, Inc.), 419 B.R. 21, 27 (Bankr.E.D.Mich.2009). This is a proceeding "arising under title 11" because it is "created or determined by a statutory provision of title 11," see id., namely Bankruptcy Code § 362(a). And this is a proceeding "arising in" a case under title 11, because it is a proceeding that "by [its] very nature, could arise only in bankruptcy cases." See Allard v. Coenen, 419 B.R. at 27.
The Court Officer relies on Mich. Comp. Laws Ann. § 440.2328(2), which is part of Article 2 of the Uniform Commercial Code ("UCC"), as adopted in Michigan. UCC Article 2 applies generally to "transactions in goods," unless "the context otherwise requires," see Mich. Comp. Laws Ann. § 440.2102. And the word "goods" is defined broadly enough to include a motorcycle. See Mich. Comp. Laws Ann. § 440.2105(1) (with exceptions not applicable here, "goods" means "all things ... which are movable at the time of identification to the contract for sale.")
Section 440.2328(2) says that "[a] sale by auction is complete when the auctioneer so announces by the fall of the hammer or in other customary manner." The parties agree that this event—in effect, the "fall of the hammer"—occurred before the Debtor's bankruptcy petition was filed (i.e., before 4:44 p.m. on September 12, 2012). But Debtor argues that, notwithstanding this statute, the sale of his motorcycle was not yet completed when the auctioneer announced that the auction was complete "by the fall of the hammer or in other customary manner." Debtor argues that § 440.2328(2) does not establish the point at which the execution sale of Debtor's motorcycle was complete. The parties have cited no cases applying or construing § 440.2328(2).
From the undisputed facts, it is clear that a contract arose between the Court Officer (in his capacity as such) and the
(emphasis added).
Viewing only these provisions in Michigan's UCC, then, one might think that title to the Debtor's motorcycle passed to the execution sale purchaser at the moment the "hammer fell" concluding the auction. But the Court concludes otherwise, based on provisions in the Michigan Vehicle Code discussed below. Those provisions, rather than the Michigan UCC, govern the issue of when title to the Debtor's motorcycle passed.
The Debtor argues that this dispute is controlled by provisions in the Michigan Vehicle Code ("MVC"), rather than the UCC. The MVC governs registration, titling, sale, transfer, ownership and regulation of motor vehicles. Mich. Comp. Laws Ann. §§ 257.1 to 257.923. Motorcycles are considered motor vehicles under the MVC. See Mich. Comp. Laws Ann. §§ 257.33; 257.31; People v. Smith, 156 Mich. 173, 120 N.W. 581, 582 (1909) (holding that motorcycles are motor vehicles).
Under Mich. Comp. Laws Ann. § 257.216, with exceptions not applicable here, every motor vehicle "is subject to the registration and certificate of title provisions" of the MVC. An owner of a vehicle must "apply to the secretary of state, upon an appropriate form furnished by the secretary of state, for the registration of the vehicle and issuance of a certificate of title for the vehicle." Mich. Comp. Laws Ann. § 257.217(1). Once a certificate of title is issued, it is "valid until canceled by the secretary of state for cause or upon a transfer of an interest shown on the certificate of title." Mich. Comp. Laws Ann. § 257.226(7).
If ownership of a vehicle passes by operation of law, "upon furnishing satisfactory proof of that ownership to the secretary of state, the person acquiring the vehicle may procure a title to the vehicle regardless of whether a certificate of title has ever been issued." Mich. Comp. Laws Ann. § 257.236(1). The MVC further provides:
Mich. Comp. Laws Ann. § 257.233(9) (emphasis added).
The Michigan Supreme Court has consistently held that compliance with the requirements of the MVC is required in order to transfer the title of a motor vehicle. See Goins v. Greenfield Jeep Eagle, Inc., 449 Mich. 1, 534 N.W.2d 467, 472 (1995) (collecting cases and explaining the importance of compliance with the Michigan Vehicle Code's transfer of title requirements to the transfer of ownership of a motor vehicle); Cain v. Kroblen GMC Truck Sales, Inc., 360 Mich. 244, 103 N.W.2d 353, 355 (1960) (recognizing repeated holdings that "transfer of title of an automobile cannot be effected without compliance with" requirements of the motor vehicle code). Failure to comply with the statutory requirements makes the transfer of title void. Bayer v. Jackson City Bank & Trust Co., 335 Mich. 99, 55 N.W.2d 746, 749-51 (1952) (failure to comply with delivery of certificate of title requirements of motor vehicle code voids automobile sale transaction); Michigan Mut. Auto. Ins. Co. v. Reddig, 129 Mich.App. 631, 341 N.W.2d 847, 849 (1983) (holding that sale of motor vehicle that did not include transfer of the certificate of title as required by statute was void).
Under the provisions of the MVC quoted above, particularly Mich. Comp. Laws Ann. § 257.233(9), each of the following events had to occur before title to the Debtor's motorcycle passed to the execution sale purchaser: (1) "delivery" of the motorcycle to the purchaser; (2) "the transfer, sale, or assignment of the title or interest in" the motorcycle; and (3) "signature on either the application for title or the assignment of the certificate of title by the purchaser, transferee, or assignee."
As the foregoing discussion suggests, on the issue of when ownership of Debtor's motorcycle changed from the Debtor to the execution sale purchaser, an apparent conflict exists between the provisions of the UCC and those of the MVC. The former apply to the sale of "goods" generally, while the latter apply to the sale of a motor vehicle (including a motorcycle) specifically. Michigan law is clear, however, that the more specific provisions of the MVC govern. See William G. Wilcox, D.O., P.C. Emp. Defined Benefit Pension Trust v. U.S., 888 F.2d 1111, 1116 (6th Cir.1989) (noting that under Michigan law, where the goods are motor vehicles, the MVC rather than the UCC controls the transfer of ownership) (citing Whitcraft v. Wolfe, 148 Mich.App. 40, 384 N.W.2d 400 (1985)). As quoted by the Sixth Circuit in Wilcox, the Michigan Court of Appeals in Whitcraft held:
Wilcox, 888 F.2d at 1116 (quoting Whitcraft v. Wolfe, 384 N.W.2d at 404) (internal citations omitted); see also Colonial
Thus, the MVC's title transfer provisions govern, and the UCC provision relied on by the Court Officer do not.
Applying the MVC provisions discussed above, the Court concludes that an evidentiary hearing is necessary to determine whether title to the motorcycle passed to the execution sale purchaser before the Debtor filed his bankruptcy petition. If it did, then the sale of Debtor's motorcycle was not a violation of the automatic stay. If it did not, then the motorcycle sale occurred post-petition, and the sale violated the automatic stay.
It is clear from the undisputed facts in this case that neither of the following two events necessary to change ownership of the motorcycle—"delivery" of the motorcycle to the execution sale purchaser; and execution of an "application for title or assignment of the certificate of title by the purchaser, transferee, or assignee" within the meaning of Mich. Comp. Laws Ann. § 257.233(9)—had yet occurred at the moment the "hammer fell" concluding the auction of the Debtor's motorcycle. And there is a factual dispute about when these events did occur, and whether they occurred before or after Debtor's bankruptcy petition was filed.
The affidavits and documents filed to date by the parties indicate, among other things, that (1) the Court Officer signed and gave to the execution sale purchaser a bill of sale for the motorcycle, dated "9-12-2012;" (2) the purchaser signed a form entitled "Statement of Vehicle Sale" that is dated "9 12 2012" and filed that document with the Michigan Secretary of State's office; and (3) the Michigan Secretary of State characterized this "Statement of Vehicle Sale" document as an application for title, and issued a certificate of title to the purchaser based on this form.
For the reasons stated in this opinion, the Court will enter an order scheduling an evidentiary hearing on the pending motions.
Id. (citations omitted).