John P. Gustafson, United States Bankruptcy Judge.
This case comes before the court on the Chapter 7 Trustee's ("Trustee") Objection
The Silverado was listed on Schedule B as having a value of $8,300. Schedule D does not list any lien against that vehicle. Schedule C claims an exemption of $7,350 in the Silverado under § 2329.66(A)(2), reflecting the motor vehicle exemptions for both Debtors.
The Trustee's Objection is based upon cases like In re Toland, 346 B.R. 444 (Bankr.N.D.Ohio 2006), denying exemptions to debtors in joint cases where the spouse does not have an ownership interest in the property. In this case, the Silverado is titled in the name of the Debtor-Husband only.
In response, Debtors assert that Mrs. Whitt is entitled to claim an exemption in the Silverado, even though Mr. Whitt's name is the only one on the title to the vehicle. Analogizing to Ohio case law holding that a spouse's dower interest is sufficient to support a homestead exemption claim, Debtors point to the Ohio statute, O.R.C. § 2106.18(AA), which provides a surviving spouse with an "interest" in at least one motor vehicle of the decedent spouse. It is Debtors position that this statutory interest is sufficient to meet the legal requirement that a debtor have an interest in the property being claimed as exempt.
For the reasons set forth below, the Chapter 7 Trustee's Objection to the Debtors' Claim of Exemption will be Sustained.
Determinations concerning the allowance of exemptions from property of the estate are core proceedings pursuant to 28 U.S.C. § 157(b)(2)(B). Accordingly, the court may enter a final order on this issue. 28 U.S.C. § 157(b)(1).
The Ohio exemption statute generally provides for exemptions of "the person's interest" in property. See, In re Toland, 346 B.R. 444, 448 (Bankr.N.D.Ohio 2006)(court finds no basis to read the term "interest" in § 3103.04 as other than complementary to the term "interest" in § 2329.66). The statutory requirement that the debtor have an "interest" has led to several Ohio bankruptcy courts holding that where a joint debtor does not hold an interest in property, an exemption will not be allowed over a timely objection. See, In re McCrory, 2001 WL 4005455 at *3, 2011 Bankr.LEXIS 3403 at *8-10 (Bankr. N.D.Ohio Sept. 8, 2011) (citing cases involving tax refunds); In re Miller, 427 B.R. 616, 620 (Bankr.N.D.Ohio 2009)(motor vehicle); In re Toland, 346 B.R. at 448-449; In re Mangold, 244 B.R. 901, 904-905 (Bankr.S.D.Ohio 2000)(entitlement to homestead exemption did not arise until conveyance to spouse after lien attached).
Under Ohio law, subject to certain exceptions, neither spouse "has any interest in the property of the other." Ohio Rev. Code § 3103.04. Debtors point to one exception to this general rule: a spouse's dower interests in real estate under O.R.C. Section 2103.02
The Debtors assert that the interest of the Debtor-Wife in the Silverado, under O.R.C. § 2106.18, is similar to a dower interest in real estate and should, therefore, be held to support her claim of exemption in the vehicle. Section 2106.18(A) states, in pertinent part:
Debtors' Schedule C lists a combined exemption of $7,350, of which $3,675 is attributable to Debtor-Wife. At the Hearing on the Trustee's Objection to the claim of exemption, Debtors' counsel argued that the exemption should be allowed based upon the Debtor-Wife's interest in the Silverado under § 2106.18(A).
Although dower rights are, in one sense, "inchoate"
There is no comparable legal protection of a spouse's interest in a motor vehicle provided by § 2106.18(A)
The difference between the dower statute and the "Right of surviving spouse to automobiles of decedent" statute are reflected in the way these different assets are transferred in Ohio. For real estate, a spouse's dower interest can be conveyed as part of a mortgage transaction, or a transfer of real property. See. Standard Federal Bank v. Staff, 168 Ohio App.3d 14, 20, 857 N.E.2d 1245, 1249-1250 (Ohio App. 1 Dist.2006)("[W]henever a married person buys real estate in Ohio, the married person's spouse automatically receives a dower interest. Thus any document that intends to convey or mortgage an interest in the property is not effective as to the non-title-holding spouse's dower interest unless that spouse has also signed the document."); In re Morgeson, 371 B.R. 798, 804 (6th Cir. BAP 2007)("A dower interest is an alienable interest that may be conveyed as security for a loan."). Under Ohio law, with certain exceptions, a dower interest generally continues until it is released. Ogan v. Ogan, 122 Ohio App.3d 580, 702 N.E.2d 472, 474 (Ohio App. 12 Dist.1997). Thus, for example, if a spouse's dower interest is not conveyed as part of a mortgage transaction, the unreleased dower interest has priority over the mortgage. In re Rosario, 402 B.R. 223, 229 (Bankr.N.D.Ohio 2009).
In contrast, O.R.C. § 4505.10(D) provides that a transfer of a vehicle to a surviving spouse under O.R.C. § 2106.18(A) "does not affect any liens upon the motor vehicle so transferred." See also, Seven Seventeen Credit Union, Inc. v. Benner, 1987 WL 18031, 1987 Ohio App. LEXIS 9003 (Ohio App. 11 Dist. Sept. 30, 1987)(discussing the transfer of a vehicle under O.R.C. § 2113.532(A), which was amended and recodified as § 2106.18 effective May 31, 1990). Further, because the statutory right to elect to take ownership of a vehicle comes into existence only if the vehicle is owned by the spouse at the
In reviewing similar arguments made in support of a claim of exemption in a vehicle not titled in the name of a debtor-spouse based upon more general "marital rights", Toland stated: "upon closer review, the rights and benefits afforded to married parties, whether these particular rights or others, cannot be read to translate into one spouse having the right to claim an exemption in the other's property." In re Toland, 346 B.R. 444, 448 (Bankr.N.D.Ohio 2006).
Looking at the issue from a slightly different perspective, the "right" provided to a surviving spouse by § 2106.18(A) appears to be a right to make an election to take the vehicle. While, under many circumstances, it would be in the surviving spouse's interest to exercise his or her rights under § 2106.18(A), there is bankruptcy case law that makes a distinction between "property", and an unexercised right of election to take property. See generally, In re Jahrling, 514 B.R. 565, 574-575 (Bankr.N.D.Ill.2014); In re Brand, 251 B.R. 912, 915 (Bankr.S.D.Fla. 2000) In re McCourt, 12 B.R. 587 (Bankr. S.D.N.Y.1981); and see, In re Allen, 415 B.R. 310, 316 (Bankr.N.D.Ohio 2009)(citing In re Brand). The court does not need to decide that issue here, but it is worth noting that the Debtors did not list a contingent right of election under § 2106.18(A) as an interest in property on Schedule B. For Question 25, the Silverado is listed as being owned by "H", for "Husband", and there are "Xs", for "None", in response to Questions 20, 21 and 35 on Schedule B.
Thus, the kind of "property interest" in a vehicle titled in the name of a living spouse at the time bankruptcy is filed is probably too tenuous and speculative to support an Ohio exemption under existing case law.
But, even if that contingent
There is case law on this issue related to dower rights, from a time when the Ohio homestead exemption was only $5,000:
In re Rudicil, 343 B.R. 181, 184 (Bankr. S.D.Ohio 2006).
In the cases cited by Rudicil, it appears that the courts valued the dower interest in determining whether the full $5,000 homestead exemption could be taken. Specifically, in the Miller case, the court stated that: "The debtor, Sharon Jean Miller, requests an exemption in the full statutory amount of $5,000.00. She is entitled, however, to no more than the present value of her inchoate dower interest." In re Miller, 151 B.R. 800, 802 (Bankr. N.D.Ohio 1992).
The same concept was addressed in a more recent decision also involving different debtors named "Miller":
In re Miller, 427 B.R. 616, 620 (Bankr. N.D.Ohio 2009)(emphasis added).
Thus, contrary to the position taken by Debtors' counsel, the existence of an exemptible property right in a vehicle (if one existed) would not automatically entitle a debtor to an exemption in the full amount provided by O.R.C. § 2329.66(A)(2). Rather, the motor vehicle exemption would be limited to the value of the interest in the Silverado held by the Debtor under § 2106.18(A). Although a methodology for determining a present value of this "right" is not found in Ohio's statutes, it appears that the value of a non-title owner spouse's contingent and defeasible "right" in a presently-owned vehicle would be very small. On the other hand, the cost of putting a dollar value on the future right to claim ownership of the Silverado—if it is not the subject of specific testamentary disposition, if the parties have not divorced, and if the same Silverado is still owned by Mr. Whitt at the time of his actuarially hypothesized time of death—would be substantial.
In facing similar types of fact situations, where the property interest of a spouse was tenuous, Ohio bankruptcy courts have held that a de minimis interest in property
In re Miller, 427 B.R. at 620-621.
In addition, if a debtor-spouse's future contingent "right" to the vehicle under § 2106.18(A) were sufficient to support a claim of exemption, there would appear to be an argument that it would be the kind of an "asset" that debtors would be required to disclose, in every bankruptcy case. See, 11 U.S.C. § 521(a)(1)((B)(i).
For all of the above reasons: 1) the Ohio law requirement that a debtor have a property interest in order to qualify to claim an exemption; 2) the tenuous nature of the property interest in the vehicle (if any); 3) what appears to be an extremely low "fair market value" for the contingent and defeasible property interest Mary Kate Whitt currently holds in the Silverado titled to her husband; and, 4) the fact that the cost of determining a value of that interest would certainly exceed the amount of the exemption; the Trustee's Objection to the Claim of Exemption will be Sustained.
