Homann v. R.I.H. Acquisitions IN, LLC (In re Lewinski), 2008 Bankr. LEXIS 2596, No. 07-03082-hcd (Bankr. N.D. Ind. Sept. 30, 2008)

In Homann, the debtor, Mark E. Lewinski, signed a credit cashing application with R.I.H. Acquisitions IN, LLC, a local casino. After approving the credit cashing application, the casino permitted Lewinski to sign “markers” in exchange for gambling chips. A marker is a counter-check that is tendered to a casino in exchange for gambling chips, which are then used in the casino to place wagers. According to the terms of the credit cashing agreement, when a patron satisfies a marker, either by returning the gambling chips or by paying the casino, the marker is returned to the patron. If a patron fails to satisfy a marker, the casino presents the marker to the patron’s bank for payment.

 In the instant action, pursuant to section 547 of the Bankruptcy Code, the trustee sought to avoid the value of the gambling chips that the Lewinsky returned to the casino to satisfy his markers. Bankruptcy Code section 547 states that “the trustee may avoid any transfer of an interest of the debtor in property… made… on or within 90 days before the date of the filing of the petition…” R.I.H. argued that the gambling chips were not an “interest of the debtor” because they had no economic value outside the casino, did not constitute currency, and could not be used to satisfy the claims of the debtor’s creditors. Rather, R.I.H. argued that the chips were merely an accounting mechanism and placeholder to evidence a debt owed.

The Court rejected the casino’s argument, stating that by signing each marker the debtor incurred a debt and was obligated to repay the funds being loaned to him. The court further stated that the chips had clear value in the casino; they were fungible tokens used as a substitute for cash, and, at the end of play could be cashed in or used to redeem a marker. The Court also dismissed the holding in Zarin v. C.I.R., 916 F.2d 110 (3rd. Cir. 1990) that gambling chips were not considered property of a taxpayer as inapposite in a bankruptcy context because that case “arose under the Internal Revenue Code, not the Bankruptcy Code.”

 This case has significant implications in connection with determining the value of property that is the subject of an avoidance action. Under Homann, if there is no clear value for the transferred items, the value received by the transferee/defendant is the amount avoidable, even if such property is less valuable to other hypothetical transferees or the debtor.