561 B.R. 384
6th Cir. BAP2016Background
- Debtor owed his longtime attorney (Appellant) about $70,000 in unpaid fees; the parties agreed Debtor would transfer two classic cars (a 1954 MG and a 1977 Ferrari) to satisfy the debt.
- Appellant took physical possession of the titles and vehicles between 2007 and spring 2012, but the certificates of title were not assigned to him until August 15, 2012—six days before Debtor filed Chapter 7 on August 21, 2012.
- After receiving title, Appellant used the cars as collateral for loans totaling $37,500 and later sold both cars in November 2013 for $40,000; Appellant performed repairs but offered no invoices for the work.
- The Chapter 7 trustee sued under 11 U.S.C. § 547(b) to avoid the transfers as preferential and sought recovery under § 550(a); bankruptcy court granted trustee partial summary judgment (transfer avoidable) and later held a valuation hearing.
- Bankruptcy court found Appellant had no perfected lien under Ohio law (perfection requires notation on the certificate of title), treated the transfer as occurring on August 15, 2012 (within the 90‑day preference period), and awarded the trustee $32,000 (MG $15,000 + Ferrari $17,000) plus prejudgment interest.
- Appellant’s Rule 59(e) motion to amend/alter judgment was denied; Appellant appealed the liability, valuation, and denial of the motion to amend.
Issues
| Issue | Plaintiff's Argument (Trustee) | Defendant's Argument (Appellant) | Held |
|---|---|---|---|
| Whether transfers were avoidable preferences under §547(b) | Transfer occurred when titles were signed over Aug. 15, 2012 — within 90 days, so avoidable | Appellant had an attorney’s lien perfected by possession of titles/vehicles earlier (2007 or May 2012), so transfer preceded 90‑day window | Held: Transfer avoidable; no perfected lien because Ohio law requires notation on certificate of title for perfection |
| Whether Appellant’s possession created an attorney’s lien under Ohio common law | N/A (trustee disputed any valid lien) | Possession of titles/vehicles created a retaining or other attorney’s lien securing fees | Held: No retaining/charging/contractual lien attached; mere possession of title/paper cannot perfect interest under Ohio Certificate of Title Act |
| Proper valuation of transferred property under §550(a) | Trustee: total proceeds/fair market value = $40,000 (or at least $25,000 Ferrari) | Appellant: Ferrari inoperable at transfer; its value was only $10,000; repairs increased later sale price | Held: Bankruptcy court did not clearly err — Ferrari FMV at transfer $17,000; total recovery $32,000 plus prejudgment interest |
| Whether denial of Rule 59(e) motion was an abuse of discretion | Trustee: motion should be denied; no new evidence or law | Appellant: court misapplied Veltri and erred on lien law; moved to alter judgment | Held: Denial affirmed — no new evidence or intervening law; no clear error of law or manifest injustice |
Key Cases Cited
- Midland Asphalt Corp. v. United States, 489 U.S. 794 (final‑order test for appealability)
- In re Eagle‑Picher Indus., Inc., 447 F.3d 461 (6th Cir.) (de novo review of legal conclusions)
- Foor v. Huntington Nat’l Bank, 27 Ohio App.3d 76 (Ohio Ct. App. 1986) (retaining lien attaches only to property that comes into attorney’s hands during representation)
- Veltri v. City of Cleveland, 167 Ohio St. 90 (Ohio 1957) (possession of vehicle alone does not confer recognizable title or interest after Certificate of Title Act)
- United States v. Ray, 803 F.3d 244 (6th Cir.) (clearly erroneous standard explained for factual findings)