Christians v. Ohmann (In re Ohmann), BKY 18-40890-KHS

605 B.R. 887

IN RE: Marc A. OHMANN, Debtor.

Julia A. Christians, Plaintiff,

v.Marc Aaron Ohmann, and Reinhart G. Ohmann, Defendants.

BKY 18-40890-KHS

ADV 18-04139-KHS

United States Bankruptcy Court, D. Minnesota.

Filed August 22, 2019

Julia A. Christians, Gordon B. Conn, Ralph Mitchell, Lapp, Libra, Thomson, Stoebner & Pusch, Minneapolis, MN, for Plaintiff.

Michael K. Hoverson, Hoverson Law Offices, P.A., Minneapolis, MN, for Defendants.

MEMORANDUM OPINION AND ORDER

KATHLEEN H. SANBERG, UNITED STATES BANKRUPTCY JUDGE

At Minneapolis, Minnesota, August 22, 2019.

This adversary proceeding came on for trial on March 19, 2019, to determine whether the balance of a jointly owned E*Trade account reported on the debtor's bankruptcy schedules is property of the estate and subject to turnover. Ralph Mitchell appeared on behalf of Plaintiff and Michael Hoverson appeared on behalf of Defendants. On March 20, 2019, the Court ordered supplemental post-trial briefing.¹ Responses were filed and the matter was submitted for decision on May 21, 2019.

This Court has jurisdiction over this adversary proceeding pursuant to 28 U.S.C. §§ 157(b)(1) & 1334, Fed. R. Bankr. P. 7001, and Local Rule 1070–1. This is a core proceeding within the meaning of 28 U.S.C. § 157(b)(2)(A), (E), & (O). Venue in this Court is proper pursuant to 28 U.S.C. §§ 1408 and 1409.

For the reasons stated below, the Court finds in favor of Defendants.

THE PARTIES

The Plaintiff, Julia A. Christians, is the Chapter 7 Trustee and a resident of the State of Minnesota ("Plaintiff").

Defendant Marc Ohmann is a resident of the State of Minnesota and the debtor in this bankruptcy case ("Marc").

Defendant Reinhardt Ohmann ("Reinhardt") is a resident of the State of Minnesota and is the debtor's father (collectively with Marc, the "Defendants").²

WITNESSES

The following witnesses provided testimony at the trial:

• Marc Aaron Ohmann – Marc Ohmann is a Defendant and the debtor in the Chapter 7 bankruptcy case. Marc testified about, among other items, the E*Trade account, an oral agreement between Reinhardt and himself regarding the handling of the E*Trade account, the loans he received from Reinhardt over the years, and his bankruptcy petition and schedules. He was a credible witness.

• Reinhardt G. Ohmann – Reinhardt Ohmann is a Defendant and Marc's father. Before retirement, Reinhardt was employed as an accountant by the State of Minnesota.³ Reinhardt provided testimony about the same topics as Marc. Reinhardt also testified about his intent for the E*Trade account. He was a credible witness.

FACTS

The following facts were either stipulated to by the parties, derived from the submitted documentary evidence, or otherwise determined by the Court.

Case and Background Information

1. Marc filed a voluntary petition for relief pursuant to Chapter 7 of the Bankruptcy Code on March 26, 2018.

2. Plaintiff was appointed Chapter 7 Trustee of Marc's bankruptcy estate.

3. Marc's bankruptcy schedules list an E*Trade Securities brokerage account (the "Account") described as follows: E*Trade Securities, LLC brokerage account *4658 held jointly with my father. He made all contributions to the account and owns the funds on deposit. I have not deposited any funds or assets and the value of my interest is zero. Balance is approximately $103,690.30.⁴

4. Marc listed the value of his interest in the Account as $1.00.⁵

5. On Schedule C, Marc claimed his joint legal title to the Account as 100% exempt under 11 U.S.C. § 523(d)(5).⁶

6. Marc scheduled an unsecured debt to Reinhardt in the amount of $185,911.00 for a loan incurred on January 2, 2004.⁷

7. Marc scheduled another unsecured debt to Reinhardt in the amount of $80,000.00 for a loan incurred on May 16, 2016.⁸

8. Marc did not amend his bankruptcy petition or schedules.

9. Plaintiff convened the Section 341 meeting of creditors on April 23, 2018.

10. On September 24, 2018, Plaintiff filed this adversary proceeding. Count I of Plaintiff's Complaint seeks a declaratory judgment that the balance of the Account is property of the estate. Should the Court find that some or all of the balance in the Account is estate property, Count II of the Complaint seeks an order requiring the balance in the Account as of the petition date to be turned over to Plaintiff.

11. The Court denied Plaintiff's Motion for Summary Judgment on January 29, 2019.⁹

12. Marc received a discharge in his Chapter 7 case on June 25, 2018.¹⁰ The case remains open.

E*Trade Account Application

13. On December 12, 1988, Reinhardt completed and executed a Personal Account Application for a margin account with E*Trade Securities, Inc.¹¹ ("E*Trade") (the "Application").¹²

14. The account type indicated on the Application is "Joint–rights of survivorship."¹³

15. A transfer on death ("TOD") account was not given as an option.¹⁴

16. Marc is listed as the account holder and Reinhardt as the co-account holder.¹⁵

17. At the time the Account was created, Marc was a student living with his parents and Reinhardt was retired.¹⁶

18. Reinhardt's address is the one provided on the Application.¹⁷

19. Both Defendants provided their social security numbers on the Application.¹⁸

20. In the Account Information Profile section of the Application, Marc's approximate annual income, liquid net worth, and total net worth is provided, not Reinhardt's.¹⁹

21. When asked how many signatures would be required to process checks, Defendants selected the option for one.²⁰

22. Both Defendants signed the Application.²¹

23. E*Trade opened the Account as requested by Defendants.

Customer Agreement

24. In the Application, Defendants acknowledged they received, read, and agreed to be bound by the terms and conditions set forth in the E*Trade Customer Agreement (the "Customer Agreement").²²

25. The parties stipulated that the most recent version of the Customer Agreement, obtained by Defendants from the E*Trade website, applies to the Account despite the Customer Agreement's effective date of October 2018.²³

26. The Customer Agreement governs Defendants' relationship with E*Trade.²⁴

27. Under the Customer Agreement, both Defendants have equal access to the funds in the Account and check writing privileges.²⁵ Checks for the Account were originally made available through United Missouri Bank.²⁶

28. Under the Customer Agreement, both Defendants have full authority to independently take any action on behalf of the Account, including the purchase and sale of securities and the ability to withdraw all the funds from the Account.²⁷

Account Components

29. There are two components to the Account—a Securities Investment Account and a Sweep Deposit Account.²⁸

30. Securities products and services are offered by E*Trade Securities LLC, member FINRA/SIPC.²⁹

31. The Sweep Deposit Account is a bank deposit account with E*Trade Bank or its subsidiaries, a federal savings bank, member FDIC.³⁰

Marc's Personal Financial Statement and Tax Returns

32. On April 20, 2017, Marc submitted a personal financial statement to Anchor Bank in support of a small business loan (the "Personal Financial Statement").³¹

33. The asset column of the Personal Financial Statement lists marketable securities worth $80,000.³² Schedule C of the Personal Financial Statement describes the securities as "Various ETrade."³³

34. When Marc submitted the Personal Financial Statement, or shortly thereafter, he provided Anchor Bank with a copy of an E*Trade monthly account statement showing that the Account was jointly owned with Reinhardt.³⁴

35. Marc reported the capital gains, losses, and dividends from the Account on his personal tax returns.³⁵

Account Deposits and Withdrawals

36. Reinhardt testified about the deposits and withdrawals made to and from the Account over the years.³⁶

37. After establishing a foundation through Reinhardt's testimony, Defendants offered a Summary of Deposits and Withdrawals (the "Summary") into evidence.³⁷

38. Plaintiff did not object to the Summary's inflow and outflow figures.³⁸

39. Plaintiff's limited objection to the Summary's admission into evidence was the description of certain line items as "loans" or "loan payments."³⁹

40. The Court admitted the Summary with Plaintiff's objection noted in the record.⁴⁰

41. The Summary reads as follows:

Summary of Deposits and Withdrawls
Etrade JTWROS xxxx-4658
Date Inflow Outflow
12/16/1998 $3,000.00 Deposit from Reinhardt, source 1st US Bank NA Credit Card
1/5/1999 $20,000.00 Deposit from Reinhardt, source US Bank
7/23/2001 $31,540.29 Deposit from Reinhardt, source loan payment by Marc (see summary loan ledger)
8/28/2001 $5,900.00 Check 1001 loan to Marc (see summary loan ledger)
11/27/2001 $1,000.00 Check 1002 loan to Marc (see summary loan ledger)
5/28/2002 $30,000.00 Deposit from Reinhardt
6/25/2002 $15,000.00 Check 1003 loan to Marc (see summary loan ledger)
11/24/2002 $300.00 Check 1004 loan to Marc (see summary loan ledger)
11/27/2002 $300.00 Check 1005 loan to Marc (see summary loan ledger)
1/2/2003 $3,500.00 Check 1006 loan to Marc (see summary loan ledger)
6/10/2003 $589.20 Check 1007 loan to Marc (see summary loan ledger)
6/19/2003 $500.00 Check 1008 loan to Marc (see summary loan ledger)
4/21/2004 $17,834.34 Check 1010 loan to Marc (see summary loan ledger)
5/28/2004 $600.00 Deposit, source loan payment by Marc (see summary loan ledger)
6/15/2004 $600.00 Deposit, source loan payment by Marc (see summary loan ledger)
6/30/2004 $600.00 Deposit, source loan payment by Marc (see summary loan ledger)
7/15/2004 $600.00 Deposit, source loan payment by Marc (see summary loan ledger)
7/30/2004 $600.00 Deposit, source loan payment by Marc (see summary loan ledger)
8/13/2004 $600.00 Deposit, source loan payment by Marc (see summary loan ledger)
8/31/2004 $600.00 Deposit, source loan payment by Marc (see summary loan ledger)
2/25/2016 $40,000.00 Reinhardt DSI share purchase
5/24/2016 $80,000.00 Loan to Marc for DSI share purchase (see summary loan ledger)41

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