Thomas Crow v. United States Bankruptcy Court for the District of Wyoming - Cheyenne ( 2019 )

NOT FOR PUBLICATION*
UNITED STATES BANKRUPTCY APPELLATE PANEL
OF THE TENTH CIRCUIT
_________________________________
IN RE THOMAS CROW, BAP No. WY-18-083
BAP No. WY-18-086
Debtor.
__________________________________
RADIANCE CAPITAL RECEIVABLES Bankr. No. 17-20280
NINETEEN LLC, STEVEN R. BAILEY, Chapter 7
Chapter 7 Trustee,
Appellants,
OPINION
v.
THOMAS CROW, aka Tom Crow and
CAROL-ANN CROW,
Appellees.
_________________________________
Appeal from the United States Bankruptcy Court
for the District of Wyoming
_________________________________
Before CORNISH, HALL, and LOYD,** Bankruptcy Judges.
_________________________________
HALL, Bankruptcy Judge.
*
This unpublished opinion may be cited for its persuasive value, but is not
precedential, except under the doctrines of law of the case, claim preclusion, and issue
preclusion. 10th Cir. BAP L.R. 8026-6.
**
Honorable Janice D. Loyd, U.S. Bankruptcy Judge, United States
Bankruptcy Court for the Western District of Oklahoma, sitting by designation.
_________________________________
Several years prior to filing for bankruptcy protection, the chapter 7 debtor and his
non-debtor spouse sold their marital home held as tenants by the entirety. Some of the net
proceeds were used to purchase a new marital home, and the remainder were transferred
to a joint investment account, both of which are also purportedly held as tenants by the
entirety. In his bankruptcy case, debtor claimed the marital home and the investment
account as exempt under Wyoming’s tenancy by entireties exemption. The chapter 7
trustee and a creditor objected to debtor’s claimed exemptions.
Balancing the interests of federal bankruptcy and state property law, the
Bankruptcy Court overruled the objections, concluding one-half of the entireties
properties belonged to the non-debtor spouse, and debtor’s one-half of the entireties
property was potentially subject to administration as non-exempt. The Bankruptcy Court
further ruled the non-exempt portion was dependent upon joint debt, and the trustee was
required to pursue turnover of the entireties property in an adversary proceeding. Both
the chapter 7 trustee and the creditor appealed. Finding no error in the Bankruptcy
Court’s decision, we AFFIRM.
I. FACTUAL BACKGROUND
Thomas Crow (“Debtor”), a retired Australian professional golfer, founded Cobra
Golf in the 1970s. After making a fortune manufacturing and selling innovative golf
clubs, Debtor sold the business in the mid-1990s and moved to Jackson, Wyoming where
he lived with his wife, Carol-Ann Crow (individually, “Mrs. Crow,” and collectively with
Debtor, the “Crows”). The Crows resided at North Deland Drive in Jackson, and title to
2
the Deland Drive residence was vested in the Crows as husband and wife, tenants by the
entirety, according to Wyoming law. 1
At some point the Crows suffered a financial crisis, and in 2008, their daughter and
son-in-law, Annabelle and Jeff Marvin (individually, “Mrs. Marvin” or “Mr. Marvin,”
collectively, the “Marvins”), loaned them $1,000,000. 2 The loan was made by Marvin
Investment Partners to various trusts the Crows had created. The purpose of the loan was
to pay expenses and enable the Crows to remain in their home.3
On April 29, 2015, the Crows sold the Deland Drive residence for $10,000,000,
realizing $5,171,813.61 in net proceeds from the sale. The Crows then purchased a
residence at North Centennial Drive, also in Jackson, Teton County, Wyoming, for
$1,550,000.4 The Crows took out a mortgage for $500,000 against the Centennial Drive
residence and paid the rest of the purchase price with proceeds from the sale of the
Deland Drive residence.
Advanced in age, the Crows sought the assistance of the Marvins to invest the
remaining Deland Drive sale proceeds. With Mr. Marvin’s help, the Crows opened a
brokerage account (the “Account”) with Fidelity Investments (“Fidelity”). In the
Application for a New Fidelity Account, the Crows indicated “Account Type” as
1
Exhibit 3 (Warranty Deed), in Appellant’s App. at 888.
2
Memorandum Decision on Debtor’s Motion to Allow Use of Portion of
Exempt Funds and Objections to Exemptions Filed by Chapter 7 Trustee and Radiance
Capital Receivables Nineteen, L.L.C. at 3-4, in Appellant’s App. at 108-09.
3
Id. at 4, in Appellant’s App. at 109.
4
The Centennial Drive marital residence is held by the Crows as tenants by
the entirety.
3
“TENANTS BY THE ENTIRETY.”5 However, on the application, tenants by the entirety
is crossed out and beside it, “Thomas L. Crow And Carol Ann Crow, Husband & Wife, as
tenants by the entirety,” is handwritten.6 Mrs. Marvin had the authority to act on behalf of
the Crows with respect to the Account as she was appointed attorney-in-fact under a
Fidelity Durable Power of Attorney. As of May 31, 2015, the Account had a balance of
approximately $3.5 million.
During 2015 and 2016, Mrs. Marvin transferred almost $900,000 from the
Account directly to the Marvins or to third parties for their benefit.7 The Marvins
considered these disbursements to be repayment of the $1,000,000 loan made to the
Crows in 2008 by Marvin Investment Partners.8
In late 2016, creditor Radiance Capital Receivables Nineteen, LLC (“Radiance”)
began attempting to collect on a judgment against Debtor. The judgment stemmed from
Debtor’s personal guarantee of a $1.5 million promissory note made by The Thomas L.
Crow Family Limited Partnership.9 Upon default, the holder of the note, 2010-1
RADC/CADC VENTURE, LLC, obtained a judgment against Debtor in Routt County,
Colorado District Court on July 5, 2013.10 The judgment was subsequently assigned to
5
Debtor’s Replacement Exhibit 12, at 1, in Appellant’s App. at 924.
6
Id., in Appellant’s App. at 924.
7
Memorandum Decision on Debtor’s Motion to Allow Use of Portion of
Exempt Funds and Objections to Exemptions Filed by Chapter 7 Trustee and Radiance
Capital Receivables Nineteen, L.L.C. at 4, in Appellant’s App. at 109. Specifically, the
transfers from the Account in 2015 totaled $532,000, and the transfers for 2016 totaled
$357,820. The transfers were either direct payments to the Marvins or payment of debts
on the Marvins’ behalf, such as credit card bills or school tuition for their children.
8
Id.; Tr. at 149-50, in Appellant’s App. at 427-28.
9
Exhibit O (Proof of Claim) at 5, in Appellant’s App. at 582.
10
Id., in Appellant’s App. at 582.
4
Radiance who registered it in Teton County, Wyoming. Radiance then served a notice of
garnishment on Fidelity attempting to reach assets in the Account, which prompted
Debtor to file for bankruptcy protection on April 18, 2017. Steven R. Bailey (“Trustee”)
was appointed as chapter 7 trustee in Debtor’s case.
Debtor listed the Centennial Drive residence, valued at $1,282,706, and the
Account, valued at $2,516,514.97, on Schedule B. On Schedule C, Debtor claimed both
the Centennial Drive residence and the Account as 100% exempt pursuant to 11 U.S.C.
§ 522(b)(3)(B)11 and Wyoming’s tenancy by the entirety exemption.12 Trustee and
Radiance objected to Debtor’s claimed exemption in the Account, arguing the exemption
did not apply because the Account was not created as a tenancy by the entirety.13 Further,
both objecting parties argued that, even if the Account was created as a tenancy by the
entirety, Debtor and Mrs. Crow had subsequently severed the Account’s tenancy by the
entirety status and forfeited its associated protections.
The Bankruptcy Court conducted an evidentiary hearing on the objections to
exemption on October 31, 2017. After hearing closing arguments by telephone and taking
the matter under advisement, the Bankruptcy Court issued a memorandum decision
overruling the objections to Debtor’s claimed exemption on April 4, 2018 (the
11
All future references to “Code,” “Section,” and “§” are to the Bankruptcy
Code, Title 11 of the United States Code, unless otherwise indicated.
12
Schedule C, in Appellant’s App. at 72.
13
Trustee’s Objection to Certain Exemptions Claimed by the Debtor, in
Appellant’s App. at 173; Objection to Debtor’s Claim of Exemptions, in Appellant’s App.
at 204. Trustee and Radiance also lodged objections to Debtor’s claimed exemption in the
Centennial Drive residence.
5
“Exemption Order”).14 In the Exemption Order, the Bankruptcy Court found the Account
application evidenced Debtor’s intent to create a tenancy by the entirety and, therefore,
concluded Wyoming’s tenancy by the entirety exemption applied to the Account. The
Bankruptcy Court also found the transfers to the Marvins and other Account activity did
not sever the Account’s entireties status. As a result, the Bankruptcy Court “allow[ed] the
Debtor’s tenants by the entirety exemption as to the [Account] and the Centennial [Drive]
real property.”15 However, the Bankruptcy Court acknowledged that “[e]ntireties property
is not exempt from process under Wyoming law from claims against both spouses.
Therefore, to ‘the extent that joint creditors existed at the filing of the bankruptcy petition,
the entireties share is not exempt.’”16 Because the parties sought to address the amount of
joint debt in a separate proceeding, the Bankruptcy Court reserved such determination
and ordered that “the amount of the exemption will be resolved upon a determination of
the amount of joint debt.”17
Debtor filed a Motion for Further Findings and/or to Clarify Memorandum
Decision (the “Motion for Clarification”) pursuant to Federal Rules of Bankruptcy
14
Memorandum Decision on Debtor’s Motion to Allow Use of Portion of
Exempt Funds and Objections to Exemptions Filed by Chapter 7 Trustee and Radiance
Capital Receivables Nineteen, L.L.C., in Appellant’s App. at 106.
15
Id. at 10, in Appellant’s App. at 115. With respect to the Centennial Drive
residence, the Bankruptcy Court stated that Trustee and Radiance “initially disputed the
exemption, but at the hearing conceded it as allowed, subject to Debtor and Mrs. Crow’s
joint debt.” Id. at 2, in Appellant’s App. at 107.
16
Id. at 9-10, in Appellant’s App. at 114-15 (citing In re Wenande, 107 B.R.
770, 774 (Bankr. D. Wyo. 1989).
17
Id. at 10, in Appellant’s App. at 115.
6
Procedure 9023 and 7052.18 Mrs. Crow joined in the Motion for Clarification.19 The
Motion for Clarification asserted there was no joint debt left to be determined because
there were no timely filed proof of claims asserting joint liabilities.20 Trustee objected to
Debtor’s Motion for Clarification, arguing there was a total of $1,807,344.80 in joint debt
based on the mortgage secured by the Centennial Drive residence and the promissory note
to Marvin Investment Partners,21 thereby rendering such portion of the Account non-
exempt.22 Trustee also filed his Motion for Entry of an Order Requiring the Transfer of
$1,807,344.80 in Funds from the Fidelity Account Based on the Court’s April 4, 2018
Memorandum Decision (the “Turnover Motion”), requesting turnover of that amount for
payment of joint debts.23
The Bankruptcy Court issued two orders in response to these motions. First, the
Bankruptcy Court amended its Exemption Order, clarifying Mrs. Crow was “entitled to
one-half of the exempt entireties property before distribution to the estate. The portion of
the other half that is subject to administration as non-exempt will be based on the amount
18
Appellee Debtor’s App. at 22. All future references to “Bankruptcy Rule”
are to the Federal Rules of Bankruptcy Procedure.
19
Joinder in Motion for Further Findings and/or to Clarify Memorandum
Decision, in Appellee Debtor’s App. at 26.
20
The Trustee’s Amended Opposition to (1) the Debtor’s Motion for Further
Findings and/or to Clarify Memorandum Decision, and (2) Carol-Ann Crow’s Joinder in
the Debtor’s Motion at 8, in Appellant’s App. at 1083.
21
The Trustee filed a proof of claim on behalf of Marvin Investment Partners
for $1,320,624. Proof of Claim, in Appellant’s App. at. 1095.
22
The Trustee’s Amended Opposition to (1) the Debtor’s Motion for Further
Findings and/or to Clarify Memorandum Decision, and (2) Carol-Ann Crow’s Joinder in
the Debtor’s Motion at 16, in Appellant’s App. at 1091.
23
Appellant’s App. at 1119. Presumably, Trustee seeks to administer the
whole amount that he contends is nonexempt entireties property from the Account.
7
of the joint debt,” which is to be determined (the “Amended Exemption Order”).24
Second, the Bankruptcy Court denied the Turnover Motion and required Trustee to seek
turnover of the entireties property through an adversary proceeding (the “Adversary
Order”).25 The Bankruptcy Court concluded, because the assets involved were held in
tenancy by the entirety by Debtor and Mrs. Crow, a non-debtor, Rule 7001(1) required
Trustee to bring an adversary proceeding “to recover money” pursuant to § 542(a).26 Both
Radiance and Trustee now appeal these determinations by the Bankruptcy Court.
II. JURISDICTION AND STANDARD OF REVIEW
Radiance and Trustee each filed appeals of the Exemption Order, the Amended
Exemption Order, and the Adversary Order. The two appeals were companioned for
purposes of briefing and argument, and the Court allowed Mrs. Crow to intervene as an
appellee in both appeals. 27
“With the consent of the parties, this Court has jurisdiction to hear timely-filed
appeals from ‘final judgments, orders, and decrees’ of bankruptcy courts within the Tenth
Circuit”28 and “with leave of the court, from other interlocutory orders and decrees.”29
24
Amended Memorandum Decision on Debtor’s Motion to Allow Use of
Portion of Exempt Funds and Objections to Exemptions Filed by Chapter 7 Trustee and
Radiance Capital Receivables Nineteen, L.L.C. at 15, in Appellant’s App. at 130.
25
Order Denying Trustee[’s] Motion for Turnover of the Fidelity Account,
Without Prejudice, in Appellant’s App. at 131.
26
Fed. R. Bankr. P. 7001(1).
27
After the appeals were filed, Trustee, Debtor, and Mrs. Crow reached an
agreement allowing Mrs. Crow to use all but $1,807,344.80 of the funds in the Account,
which the Bankruptcy Court approved. See Order Granting Stipulation to Resolve,
without Prejudice, Carol-Ann Crow’s Motion for Release of Funds, in Appellant’s App.
at 1286.
28
Straight v. Wyo. Dep’t of Trans. (In re Straight), 248 B.R. 403, 409 (10th
Cir. BAP 2000) (first quoting 28 U.S.C. § 158(a)(1), and then citing 28 U.S.C.
8
After entering an order to show cause regarding finality of the appealed orders and
considering the responses thereto, a motions panel of this Court concluded the Adversary
Order was a final order,30 but that the Exemption Order and Amended Exemption Order
were interlocutory. However, the motions panel granted leave to appeal pursuant to 28
U.S.C. § 158(a)(3), concluding the appeals addressed a controlling question of law as to
which there are grounds for differing opinions and immediate appeal would materially
advance the ultimate termination of the litigation.31 Neither party in this case elected for
this appeal to be heard by the United States District Court pursuant to 28 U.S.C. § 158(c).
Accordingly, this Court has jurisdiction over these appeals.32
§ 158(b)(1), (c)(1) and Fed. R. Bankr. P. 8002).
29
28 U.S.C. § 158(a)(3).
30
Order Allowing Appeals to Proceed, in Appellant’s App. at 1289. The panel
consisted of Chief Judge Nugent and Judges Michael and Jacobvitz. (“This Court
previously held that an order denying a motion as procedurally improper and requiring a
party to pursue claims in an adversary proceeding, as opposed to a contested matter, “is a
final order for purposes of appeal.” Staker v. Jubber, UT-12-072 (10th Cir. BAP Oct. 25,
2012)).
31
Id.
32
In her brief (BAP ECF 50), Mrs. Crow argues the notices of appeal were
untimely with respect to the interlocutory Exemption and Amended Exemption Orders
because they did not merge into the final Adversary Order. However, a motions panel of
this Court entered an Order Allowing Appeals to Proceed. In light of the following facts :
(i) the Exemption Order was previously timely appealed but was not final (see BAP cases
WY-18-060 and WY-18-061); (ii) Mrs. Crow failed to argue that the Exemption and
Amended Exemption Orders did not merge into the Adversary Order in her response
(BAP ECF 17) to the Court’s Order to Show Cause Why Appeal Should not be Dismissed
as Interlocutory; (iii) the Exemption and Amended Exemption Orders concern the extent
to which exemption of the Account is allowed which is to be determined in the adversary;
and (iv) the merits of the Bankruptcy Court’s orders are being affirmed and such rulings
are favorable to Mrs. Crow, we decline to further address Mrs. Crow’s argument that our
review should be limited to the Adversary Order.
9
“For purposes of standard of review, decisions by judges are traditionally divided
into three categories, denominated questions of law (reviewable de novo), questions of
fact (reviewable for clear error), and matters of discretion (reviewable for ‘abuse of
discretion’).”33 Our de novo review of legal issues requires an independent determination,
giving no special weight to the bankruptcy court’s decision.34 We review a bankruptcy
court’s factual findings under the clearly erroneous standard. A factual finding is “clearly
erroneous” when “it is without factual support in the record, or if the appellate court, after
reviewing all the evidence, is left with the definite and firm conviction that a mistake has
been made.”35 Mixed questions of law and fact arise “‘when the facts are admitted or
established and the law is undisputed,’ and the issue is only whether the facts meet the
statutory standard.”36 “Where the mixed question involves primarily a factual inquiry, the
clearly erroneous standard is appropriate. If, however, the mixed question primarily
involves the consideration of legal principles, then a de novo review by the appellate
court is appropriate.”37
Here, the issues on appeal presented primarily involve legal issues. The validity of
Debtor’s claimed state law exemption with respect to the Account property is reviewed de
33
Pierce v. Underwood, 487 U.S. 552, 558 (1988); Fowler Bros. v. Young (In
re Young), 91 F.3d 1367, 1370 (10th Cir. 1996).
34
Salve Regina College v. Russell, 499 U.S. 225, 238 (1991).
35
Las Vegas Ice & Cold Storage Co. v. Far W. Bank, 893 F.2d 1182, 1185
(10th Cir. 1990) (quoting LeMaire ex rel. Le Maire v. United States, 826 F.2d 949, 953
(10th Cir. 1987)).
36
In re Tri-State Equip., Inc. 792 F.2d 967, 970 (10th Cir. 1986) (citing
Supre v. Ricketts, 792 F.2d 958, 961 (10th Cir. 1986)). ).
37
Supre v. Ricketts, 792 F.2d at 961.
10
novo,38 without deferring to the Bankruptcy Court’s interpretation of state law.39
Likewise, we also review the Bankruptcy Court’s conclusion that an adversary
proceeding was required, i.e., interpretation and application of the Bankruptcy Rules, de
novo.40
III. ANALYSIS
Radiance and Trustee each raise several issues on appeal, some of them directly
related to issues actually decided by the Bankruptcy Court and some of them related to
questions that are yet to be resolved in the adversary proceeding on turnover.41
Additionally, arguments made by Debtor and Mrs. Crow in response to Radiance’s and
Trustee’s asserted errors on appeal go beyond the scope of the Bankruptcy Court’s
decisions.42 As our jurisdiction is confined to judgments, orders, or decrees entered by the
Bankruptcy Court, we will not address those issues, or any sub-issues that are part and
38
In re Jennings, No. WY-17-002, 2017 WL 5591463, at *2 (10th Cir. BAP
Nov. 21, 2017) (unpublished), aff’d 739 F. App’x 505 (10th Cir. 2018) (citing In re
Borgman, 698 F.3d 1255, 1259 (10th Cir. 2012) (Validity of claimed state law exemption
is reviewed de novo, without deferring to the bankruptcy court’s interpretation of state
law.)).
39
In re Borgman, 698 F.3dat 1259 (quoting In re Wagers, 514 F.3d 1021,
1024 (10th Cir. 2007)).
40
Id..
41
For example, Radiance argues Trustee is entitled to at least one-half of the
Account (see Appellant’s Opening Brief, BAP ECF 40, at 21), and Trustee argues the
undisputed amount of the joint debt is $1,807,344.80 (see Co-Appellant’s Brief, BAP
ECF 35, at 44).
42
Debtor argues there is no debt to be administered by the Trustee from the
tenancy by the entirety property. Further, both Debtor and Mrs. Crow argue that Trustee
may not administer the Centennial Drive residence because the debt thereon is fully
secured (see Appellee Thomas Crow’s Brief, BAP ECF 52, at 14, 16-17 and Appellee’s
Brief, BAP ECF 50, at 40).
11
parcel thereof, that the Bankruptcy Court has specifically reserved for determination in
the adversary proceeding.43
Additionally, because the parties do not appear to view the Bankruptcy Court’s
decisions in precisely the same way, we find it essential to set forth our interpretation of
the Bankruptcy Court’s Exemption Order, Amended Exemption Order, and Adversary
Order before analyzing the parties’ arguments on appeal. We summarize the Bankruptcy
Court’s conclusions as follows: (i) the Crows hold the Centennial Drive residence as
tenants by the entirety, and it is, therefore, potentially exempt under § 522(b)(3)(B);44 (ii)
on the petition date, the Crows held the Account as tenants by the entirety, and it is,
therefore, potentially exempt under § 522(b)(3)(B); (iii) Mrs. Crow, as a non-filing
spouse, is entitled to have her one-half interest in the entireties property separated from
the bankruptcy estate prior to administration; (iv) Debtor’s one-half interest in the
entireties property is subject to administration by Trustee to the extent of the amount of
joint debt owed by the Crows; (v) the amount of the joint debt and, therefore, the exempt
amount of Debtor’s one-half interest in the entireties property was reserved for
determination;45 and (vi) Trustee must pursue turnover of Debtor’s one-half interest in the
43
Contrary to Debtor’s assertion, it is not presumed that this Court decided to
resolve the issue of joint debt on the merits simply because his Motion to Strike Portion
of Co-Appellant’s (Trustee’s) Brief (BAP ECF 39) was referred to this merits panel and
not ruled upon by a motions panel (BAP ECF 46). Further, because he subsequently
withdrew it (BAP ECF 48), Debtor’s motion to strike is DENIED as moot.
44
On appeal, neither Radiance nor Trustee challenge the exemption of the
Centennial Drive residence, in and of itself, as entireties property.
45
As mentioned above, Trustee argues the joint debt has been definitively
established as $1,807,344.80, and Debtor argues there is no joint debt. But the amount of
joint debt and, therefore, the amount of the entireties exemption, was clearly reserved for
determination in a subsequent proceeding and is not before us on appeal.
12
entireties property by way of an adversary proceeding because Mrs. Crow still retains an
interest in such property. We decline to address the issue of whether the portion of
entireties property subject to administration is available to all creditors of the estate or
only joint creditors.46
A. The Bankruptcy Court Did Not Err in Concluding the Account was
Tenancy by the Entirety Property Eligible for Exemption Pursuant to §
522(b)(3)(B).
“Property interests are created and defined by state law[,]” and unless some federal
interest requires otherwise, interests of parties in bankruptcy proceedings are analyzed
under state law.47 Additionally, the scope and application of state exemptions are defined
by the state courts, and we are bound by their interpretations.48 Moreover, our
interpretation of exemption statutes must further the spirit of such laws, and we “must be
‘guided by the general principle that exemption statutes are to be liberally construed so as
to effect their beneficent purposes.’”49
1. The Account was Established and Held by Debtor and Mrs. Crow as
Tenants by the Entirety.
“Tenancy by the entirety” is a form of concurrent property ownership unique to
spouses. The term results from the fact that spouses “are seized of the entirety; neither can
46
In absence of a determination of joint debt, and therefore, whether there is
in fact entireties property subject to administration by Trustee, a decision regarding
distribution is premature. We note, however, that § 522(k) provides, with limited
exceptions, “[p]roperty that the debtor exempts under this section is not liable for
payment of any administrative expense.” See Law v. Siegel, 571 U.S. 415 (2014); In re
Holley, 661 F. App’x 391 (6th Cir. 2016).
47
Butner v. United States, 440 U.S. 48, 55 (1979).
48
In re Borgman, 698 F.3d 1255, 1259 (10th Cir. 2012).
49
In re Gregory, 245 B.R. 171, 173 (10th Cir. BAP 2000) (quoting Royal v.
Pancratz (In re Pancratz), 175 B.R. 85, 93 (D. Wyo. 1994)).
13
sever the union of interest without the concurrence of the other; each and both own the
whole estate during their lives, and upon the death of either the survivor continues to own
the whole estate; each is seized of an indivisible entirety; so neither has a separate interest
therein that can be aliened.”50 The original purpose of this form of co-ownership was “to
protect a wife from the husband who might irresponsibly lose the family home or other
assets.”51
At early common law, tenancy by the entirety was the most prevalent form of
concurrent ownership of property by married couples.52 Today, however, tenancy by the
entirety and the protection it affords spouses are recognized in only one-half of the states
and the District of Columbia, and the law varies significantly from state to state. For
example, a subset of those states recognizing tenancy by the entirety do so only with
respect to real property.53 Further, the means of establishing a tenancy by the entirety runs
the gamut from a presumption when property is held jointly by spouses to the requirement
that the parties must specifically express intention in writing to take or hold property as
tenants by the entirety. Additionally, of the states recognizing tenancy by the entirety, not
all provide that entireties property is exempt from process for the debt of only one
spouse.54 Thus, we necessarily begin by discussing Wyoming tenancy by the entirety
50
Pet. v. Dona, 54 P.2d 817, 825 (Wyo. 1936). See also Zubrod v. Duncan
(In re Duncan), 329 F.3d 1195, 1201 (10th Cir. 2003).
51
In re Bellingroehr, 403 B.R. 818, 820 (Bankr. W.D. Mo. 2009).
52
1 John Tingley, et al., Marital Property Law § 1:2 (2d ed. June 2019).)
53
In re Jaffe, 932 F.3d 602, 606 (7th Cir. 2019); 1 Edward F. Koren, Estate,
Tax & Pers. Fin. Planning § 10:6| (September 2019). See also W.W. Allen, Estates by
Entirety in Personal Property, 64 A.L.R. 2d 8 (2019).,.
54
See 1 John Tingley, et al., Marital Property Law § 2:6 (2d ed. June 2019).)
J.H. Cooper, Interest of Spouse in Estate by Entireties as Subject to Satisfaction of His or
14
law.
Wyoming law recognizes co-ownership of property by a husband and wife as
tenants by the entirety with respect to both real and personal property.55 The plain
language of Wyoming Statute § 34-1-140 evidences the Wyoming legislature’s intent to
allow citizens to hold personal property as tenants by the entirety by providing that a
tenancy by the entirety “as to any interest in real or personal property may be established
. . . by designating in the instrument . . . the names of such . . . tenants by the entirety.”56
The Wyoming Supreme Court also interprets the statute as Wyoming’s recognition of
“tenancies by the entirety in real or personal property.”57 If spouses hold real or personal
property as tenants by the entirety, under Wyoming law, such property is generally not
subject to legal process to satisfy a debt of only one spouse.58
The method of establishing a tenancy by the entirety in Wyoming has evolved over
time. Historically, the Wyoming Supreme Court “accept[ed] the presumption that a
conveyance to husband and wife, without saying anything more, intend[ed] the creation
of a tenancy by the entireties.”59 More recently, however, the Wyoming Supreme Court
Her Individual Debt, 75 A.L.R. 2d 1172 (2019).
55
In re Anselmi, 52 B.R. 479, 485 (Bankr. Wyo. 1985) (citing Fehling v.
Cantonwine, 379 F. Supp. 1250 (D. Wyo. 1974)).
56
Wyo. Stat. § 34-1-140 (1979) (emphasis added).
57
Lurie v. Blackwell, 51 P.3d 846, 851, n.3 (Wyo. 2002) (first citing Oatts v.
Jorgenson, 821 P.2d 108, 114 (Wyo. 1991), then citing Choman v. Epperly, 592 P.2d
714, 715-19 (Wyo. 1979), then citing Nat’l Bank of Newcastle v. Wartell, 580 P.2d 1142,
1144 (Wyo. 1978); and finally citing Wyo. Stat. § 34-1-140 (2001)).
58
United States v. Lain, No. 17-CV-113, 2019 WL 2051960, at *8 (D. Wyo.
Feb. 5, 2019 (unpublished) (citing Baker v. Speaks, 334 P.2d 1215,-1221(Wyo. 2014) and
Talbot v. United States, 850 F. Supp. 969, 975 (D. Wyo. 1994)).
59
Witzel v. Witzel, 386 P.2d 103, 105 (Wyo. 1963).
15
and the Wyoming legislature have moved away from the presumption of creation of
tenancy by the entirety or joint tenancy between husband and wife in favor of a tenancy in
common when the conveyance is silent as to the classification of the concurrent estate.60
Specifically, the Wyoming Supreme Court has held, absent an express intention to create
a joint tenancy, “a tenancy in common was presumed.”61 The Wyoming legislature
embraced this view by enacting Wyoming Statute § 34-1-140 (emphasis added), which
provides,
A joint tenancy or a tenancy by the entirety as to any interest in real or
personal property may be established by the owner thereof, by designating
in the instrument of conveyance or transfer, the names of such joint
tenants or tenants by the entirety, including his own, without the necessity
of any transfer or conveyance to or through a third person.62
The Wyoming Supreme Court has since held that § 34-1-140 “reflects a legislative
intention that ‘joint tenancies’ and ‘tenancies by the entireties’ are created by the use of
one or the other of those phrases.”63 “Therefore, the current state of Wyoming law
presumes a conveyance to two individuals that is silent as to the classification of the
concurrent estate they hold produces a tenancy in common, and this result is so even if
those two individuals are husband and wife.”64
60
Lain, at 2019 WL 2051960, at *8 (citing Choman , 592 P.2d at 718.; Wyo.
Stat. § 34-1-140 (1977)).
61
Choman, 592 P.2d at 718 (referencing the holding in Nussbacher v.
Manderfeld, 186 P.2d 548 (Wyo. 1947)).
62
Wyo. Stat. § 34-1-140 (1977) (emphasis added).
63
In re Thomas, 199 P.3d 1090, 1095 (Wyo. 2009).
64
Lain, 2019 WL 2051960, at *8.
16
In Wambeke v. Hopkin,65 the Wyoming Supreme Court ruled as follows regarding
the creation of tenancy by the entirety:
In order to create in Wyoming a joint tenancy or tenancy by the
entirety, in personal property, there must exist one of the following
minimum requirements:
1. Each of the four unities of interest, time, title, and
possession must be present, with the added unity of
person for a tenancy by the entirety; or
2. In the absence of one or more of the first four
unities, it must be evident from the language of the
instrument itself that the parties thereto intended to
create a right of survivorship.66
Herein, the Bankruptcy Court, citing Wambeke, acknowledged that unity of possession
was missing but concluded the Account was held by the Crows as tenants by the
entirety.67 The Bankruptcy Court relied on the Account application that specifically states
the Account should be opened in the names of “Thomas and Carol Ann Crow, Husband &
Wife, as tenants by the entirety.”68 Inclusion of the phrase “tenants by the entirety” avoids
the presumption of a tenancy in common by expressly indicating the Crows’ intent.69
On appeal, as it did before the Bankruptcy Court, Radiance argues the Account
application is not the type of “instrument of conveyance or transfer” sufficient to
evidence Debtor’s intent to create a tenancy by the entirety. Radiance relies, in part, on In
65
372 P.2d 470 (Wyo. 1962).
66
Id. at 475-76 (emphasis added).
67
Although Wambeke is a 1962case, the second minimum requirement is
consistent with Wyoming’s subsequent move away from presumption of a tenancy by the
entirety. It requires express intent by the parties, and it is this requirement that the
Bankruptcy Court relied on.
68
Debtor’s Replacement Exhibit 12, at 1, in Appellant’s App. at 924.
69
In re Thomas, 100 P.3d 1090, 1095 (Wyo. 2009).
17
re Anselmi70 to support its argument. In Anselmi, a debtor claimed a tenancy by the
entirety exemption with respect to four types of personal property: a contract for deed,
stock shares, a foreign trust, and household goods and artwork. Analyzing the different
types of assets, the bankruptcy court distinguished the household goods and artwork
because they were “personalty without instruments of title.”71 The bankruptcy court held
that the household goods and artwork did not meet the first of Wambeke’s minimum
requirements because there was no unity of interest and further did not meet Wambeke’s
second minimum requirement “because by the nature of the property there is no
‘instrument’ of title upon which an intent to create a right of survivorship may be
shown.”72 Accordingly, the bankruptcy court held the household goods and artwork were
not exempt as property held as tenants by the entirety.73
Analogously, Radiance argues the Account application is not an instrument of
conveyance or transfer and urges this Court to reject the Bankruptcy Court’s findings and
conclusions that the Account application created a tenancy by the entirety. While we
agree that the language of § 34-1-140 provides that tenancy by the entirety “may be
established” in “the instrument of conveyance or transfer,” Radiance’s interpretation and
focus on “conveyance” and “transfer” as modifiers of “instrument” is misplaced and
would unduly narrow the types of personal property that may be held by entireties.74
70
52 B.R. 479 (Bankr. D. Wyo. 1985).
71
Id. at 491.
72
Id. at 492.
73
Id. at 492.
74
The point is well illustrated by the facts of this case. Establishment of the
Account did not strictly involve a conveyance or transfer. The Crows owned the Deland
Drive marital residence as tenants by the entirety and proceeds from the sale of that
18
First, the statute provides that joint tenancy or tenancy by the entirety “may be
established” in an instrument of conveyance or transfer, not that it “must be established”
in such an instrument. Second, there is nothing to suggest that § 34-1-140 was enacted by
the Wyoming legislature in order to limit the types of property that may be held in
tenancy by the entirety or joint tenancy to only those involving an instrument of
conveyance or transfer.75 Instead, the very language of § 34-1-140 (“without the
necessity of any transfer or conveyance to or through a third person”) gives the
impression that its primary purpose is to eliminate the necessity of a strawman transaction
when one spouse is conveying property to himself and his spouse as tenants by the
entirety.76
Further, Radiance’s interpretation is inconsistent with the Anselmi bankruptcy
court’s explanation and description of the term “instrument.” Although neither Wyoming
statute nor Wyoming case law specifically defines the term instrument for these purposes,
the Anselmi bankruptcy court opined that:
marital residence are in the Account purportedly held as tenants by the entirety. The form
of the property has changed, but it is owned by the same people in the same manner.
75
For example, Wyoming recognizes that bank accounts may be held in joint
tenancy with right of survivorship, Fleig v. Estate of Fleig, 413 P.3d 638, 643-44 (Wyo.
2018), and such is established via the account agreement and/or account signature card,
which are not technically instruments of transfer or conveyance.
76
Anselmi, 52 B.R. at 486, n.6 (“Section 34-1-140 was apparently intended to
remedy the situation which existed at common law wherein one spouse could not convey
to himself and his spouse to create an estate by the entirety. This disability necessitated a
conveyance to a third party “strawman,” who would then reconvey the property to the
husband and wife jointly. In most states which continue to recognize tenancy by the
entirety, statutes similar to § 34-1-140, allow a tenancy by the entirety to be created by a
direct conveyance from one spouse to both of them, thereby eliminating the “strawman”
transaction.”).
19
a careful reading of Wambeke indicates that, in this context, the word
[instrument] refers to those writings which give formal expression to a legal
act or agreement for the purpose of creating, securing, modifying, or
terminating a right. As used by the Wambeke court, “instrument” might
include bills, bonds, conveyance, leases, mortgages, contract, promissory
notes, deeds, and other similar writing whereby “chattel is embodied in a
document.”77
Here, the Bankruptcy Court concluded the Account application – a formal written
document that embodies the chattel and expresses an agreement to create rights with
respect to that property – clearly and unmistakably evidenced “the Debtor’s intent to hold
the [A]ccount as tenants by the entirety.”78 We agree. The application that creates the
Account and establishes the rights of the parties thereto is unambiguous. Debtor
expressly stated his intent by using the language – “as tenants by the entirety” – thus
complying with the requirements the Wyoming law.79
Even if there were ambiguity, the Crows’ intent was further supported by Mr.
Marvin’s testimony that, in helping the Crows set up the Account, he recommended
Fidelity because it was one of the few brokerage firms allowing accounts to be held as
tenants by the entirety.80 The Bankruptcy Court’s conclusion is also bolstered by the fact
the Account was established with proceeds from the sale of the Deland Drive residence,
77
Id. at 492.
78
Amended Memorandum Decision on Debtor’s Motion to Allow Use of
Portion of Exempt Funds and Objections to Exemptions Filed by Chapter 7 Trustee and
Radiance Capital Receivables Nineteen, L.L.C. at 7, in Appellant’s App. at 122.
79
See Debtor’s Replacement Exhibit 13, in Appellant’s App. at 948.
80
Tr. at 191, in Appellant’s App. at 438.
20
which was held by the Crows as tenants by the entirety, and, therefore, the proceeds retain
their character.81
Radiance argues, notwithstanding the Crows’ designation of the Account as
entireties property, the terms of the Account contradict the nature of a tenancy by the
entirety as they allow for either party to act as if he or she is the sole owner of the
Account, without any approval from the joint owner. But, under the second minimum
requirement set forth in Wambeke and the Wyoming statute, the crucial consideration in
determining whether property is held as tenants by the entirety is the parties’ express
intention when ownership of the property is established. The additional terms contained
in the Account application are merely Fidelity’s boiler plate language and cannot override
the parties’ unambiguous intent.82 Wyoming law provides a tenancy by the entirety may
be established when the owner of the property designates the property as such in the
instrument or document establishing or creating ownership of the property. Therefore, it
is unnecessary to look beyond Debtor’s designation, “Thomas L. Crow And Carol Ann
Crow, Husband & Wife, as tenants by the entirety” to ascertain his intent.83 Accordingly,
81
Cates v. Daniels, 628 P.2d 862, 866 (Wyo. 1981) (“[T]he proceeds, or
equity from the sale of marital property, remains entireties property.” (citing Ward Terry
& Co. v. Hensen, 297 P.2d 213, 219-20 (Wyo. 1956))). See also In re Benzaquen, 555
B.R. 63 (Bankr. S.D. Fla. 2016) (regardless of whether bank account was entireties
account, funds deposited in account traceable to sale of homestead property owned as
tenants by the entirety did not lose their entireties character simply by virtue of being
deposited in account).
82
See Fleig v. Estate of Fleig, 413 P.3d 638, 641 (Wyo. 2018) (citing In re
Guardianship of Bratton, 344 P.3d 255, 257 (Wyo. 2015) (intention of the parties is
controlling)). The Court would also point out that the cases cited by Radiance to support
its argument in this regard were not decided under Wyoming law. See Appellant’s
Opening Brief at 17-18.
83
Debtor’s Replacement Exhibit 12, at 1, in Appellant’s App. at 924.
21
we conclude the Bankruptcy Court did not err in determining the Account was held by
Debtor and Mrs. Crow as tenants by the entirety.
2. The Tenancy by the Entirety Status of the Account was Not Severed by
Subsequent Transactions.
On appeal, Radiance argues, even if the application created an Account held as
tenants by the entirety, the Bankruptcy Court erred in concluding that subsequent acts by
Debtor, Mrs. Crow, and the Marvins did not sever the Account’s tenancy by the entirety
status. We disagree.
When an asset is held as tenants by the entirety, it generally continues during the
existence of the marital relationship, and neither spouse can sever the entirety without the
consent of the other.84 In Wyoming, a tenancy by the entirety “can be changed or severed
only by the voluntary joint acts of both parties or by operation of law, e.g., by divorce.”85
Aside from death or divorce, severing a tenancy by the entirety requires “mutual
agreement,” which “need not be explicit, but may be implied or inferred from the conduct
of the parties, provided the conduct is inconsistent with the continuation of an entirety
estate.”86 In Witzel v. Witzel,87 the Supreme Court of Wyoming highlighted the
requirement that a tenancy by the entirety can only be severed by joint rather than
unilateral action. It explained the difference between joint tenancy and tenancy by the
entirety is “the right which exists in a joint tenant, and not in a tenant by the entirety, to
84
Wambeke v. Hopkin, 372 P.2d 470, 474 (Wyo. 1962).
85
Id. (citing Hutcherson v. United States, 92 F. Supp. 168, 170 (D. Mo. 1950),
aff’d, 188 F.2d 326 (8th Cir. 1951)).
86
41 C.J.S. Husband & Wife § 46 (citing In re Nagel, 298 B.R. 582 (Bankr.
E.D. Va. 2003)).
87
386 P.2d 103 (Wyo. 1963).
22
sever the tenancy by his sole act as an inter vivos transaction, and thus destroy the right of
survivorship.”88
Radiance argues the Bankruptcy Court improperly ignored transfers from the
Account to the Marvins on account of a promissory note executed by the Crows in favor
of Marvin Investment Partners. While Marvin Investment Partners is technically the party
to the promissory note, the Bankruptcy Court found the Marvins loaned the Crows the
funds through Marvin Investment Partners. Nothing in the record suggests this finding
was clearly erroneous. Furthermore, Radiance fails to explain how transfers to the
Marvins result in severance of the tenancy by the entirety. Standing alone, the transfers to
the Marvins, in and of themselves, do not reflect Debtor and Mrs. Crow’s mutual or joint
agreement to terminate the entireties estate but rather an intent to repay a joint debt.
Radiance and Trustee also argue Debtor and Mrs. Crow mutually agreed to sever
the tenancy by the entirety by executing a stipulation allowing Mrs. Crow to withdraw all
but $1,807,344.80 of the funds from the Account.89 Though agreed to by counsel for
Debtor and Mrs. Crow, the joint stipulation was executed on December 21, 2018, more
than one year after the petition date. It is well established that a debtor’s right to an
exemption is determined on the petition date.90 Further, the language of the
88
Id. at 109 (quoting Dimock v. Corwin, 99 F.2d 799, 801 (2d Cir. 1938)).
89
The parties reference the Joint Stipulation to Resolve, without Prejudice,
Carol-Ann Crow’s Motion for Release of Funds, in Appellant’s App. at 1286.
90
White v. Stump, 266 U.S. 310, 313 (1924) (“[T]he point of time which is to
separate the old situation form the new in the bankrupt’s affairs is the date when the
petition is filed.”); Mansell v. Carroll, 379 F.2d 682, 684 (10th Cir. 1967) (same); In re
Hall, 441 B.R. 680, 685 (10th Cir. BAP 2009) (citing In re Robinson, 295 B.R. 147, 153
(10th Cir. BAP 2003)).
23
§ 522(b)(3)(B) exemption itself refers to “interests of the debtor in property as of the
commencement of the case.” 91 Therefore, any agreement to modify the estate held in the
Account after the date of the petition has no bearing on the status of the entireties
exemption that was applicable on the petition date.
B. The Bankruptcy Court did not Err in Setting Aside One-Half of the
Entireties Property as Mrs. Crow’s Interest before Distribution by the
Estate.
Having concluded that the Bankruptcy Court did not err in holding that the
Account is tenancy by the entirety property, we now address Radiance and Trustee’s
asserted errors regarding the treatment of the entireties property in the bankruptcy case.
1. Tenancy by the Entirety Property in Bankruptcy Generally
The reported case law involving tenancy by the entirety property in bankruptcy,
like state law regarding tenancy by the entirety, varies widely and is difficult to reconcile.
The treatment of entireties property in bankruptcy necessarily depends heavily on the
facts of each case because numerous variables are in play. These might include, but are
not limited to, whether the bankruptcy case is that of an individual debtor or joint debtors,
whether the bankruptcy case is filed under chapter 7 or chapter 13, the type of property
that is held in tenancy by the entirety and whether it is partitionable (e.g., a residence
versus a bank account), whether the joints debts relate to the tenancy by the entirety
property, and whether the joint debts are secured versus unsecured. As the Fourth Circuit
91
See In re Hamacher, 535 B.R. 180, 187 (Bankr. E.D. Mich. 2015) (debtor
was entitled to claim exemption with respect to realty held in tenancy by the entirety
notwithstanding that debtor’s spouse died during administration of the case vesting
property in debtor alone).
24
Court of Appeals has opined, the question of how to deal with property held by debtors as
tenants by the entirety is a “bedeviling issue in bankruptcy law.”92 We wholeheartedly
concur with this sentiment.
Although we analyze the property interests of parties in bankruptcy proceedings
under state law,93 once that state law determination is made, courts “must still look to
federal bankruptcy law to resolve the extent to which that interest is property of the
estate.”94 At least three sections of the Bankruptcy Code specifically come into play in the
tenancy by the entirety context. First, under § 541(a)(1), “all legal and equitable interests
that a debtor holds in property at the commencement of a bankruptcy case” are included
in the bankruptcy estate. The Code’s broad definition of the estate includes a debtor’s
interest in property held in tenancy by the entirety.95 Thus, it would appear that all
tenancy by the entirety property in which a debtor has an interest comes into the
bankruptcy estate pursuant to § 541 because the debtor has an interest in the whole
property.96
92
In re Bunker, 312 F.3d 145, 148 (4th Cir. 2002). Additionally, one
bankruptcy law professor has stated that “the law of administering [entireties property is]
extraordinarily complex – as complex as any bankruptcy issue I have ever encountered.”
David Gray Carlson, The Federal Law of Property: The Case of Inheritance Disclaimers
and Tenancy by the Entireties,, 75 Wash. & Lee L. Rev. 3 (Winter 2018).
93
Butner v. United States, 440 U.S. 48, 55 (1979).
94
Cohen v. Chernushin (In re Chernushin), 911 F.3d 1265, 1269 (10th Cir.
2018) (quoting Parks v. FIA Card Servs., N.A. (In re Marshall), 550 F.3d 1251, 1255
(10th Cir. 2008)).
95
In re Jaffe, 932 F.3d 602, 607 (7th Cir. 2019); In re Brannon, 476 F.3d 170,
174 (3d Cir. 2007).
96
Talbot v. UnitedStates, 850 F. Supp. 969, 972-73 (D. Wyo. 1994) (citing
Peters v. Dona, 54 P.2d 817, 825 (Wyo. 1936)).
25
However, § 522(b)(3)(B)97 exempts “any interest in property in which the debtor
had an interest as a tenant by the entirety [ ], to the extent that interest as a tenant by the
entirety is exempt from process under applicable nonbankruptcy law.”98 “In Wyoming,
property held as tenants by the entirety cannot be executed upon to satisfy a judgment [or
debt] against only the husband or the wife.”99 Thus, the amount of a couple’s joint debts
potentially interacts with the tenancy by the entirety exemption under § 522(b)(3)(B).100
But Congress, well aware of the complex problems arising when fewer than all co-
owners of property have filed for bankruptcy protection, also enacted § 363(h), (i), and
(j). These provisions allow a trustee to partition101 co-owned property in which the debtor
has an undivided interest as a tenant in common, joint tenant, or tenant by the entirety. If
partition is not feasible, the trustee may, subject to certain hurdles and limitations, sell the
property and divide the proceeds of the sale between the estate and the co-owners.
Specifically, § 363(j) provides:
After a sale of property to which subsection . . . (h) of this section
applies, the trustee shall distribute to the debtor’s spouse or the co-
owners of such property, as the case may be, and to the estate, the
proceeds of such sale, less the costs and expenses, not including any
97
Section 522(b)(3)(B) was previously denoted as § 522(b)(2)(B).
98
In re Jennings, No. WY-17-002, 2017 WL 5591463, at *1 (10th Cir. BAP
Nov. 21, 2017) (unpublished), aff’d 739 F. App’x 505 (10th Cir. 2018) (unpublished).
99
Baker v. Speaks, 295 P.3d 847, 858-59 (Wyo. 2013) (multiple citations
omitted).
100
Jennings, 2017 WL 5591463, at *5 (quoting In re Wenande, 107 B.R. 770,
774 (Bankr. D. Wyo. 1989)).; In re Welty, 217 B.R. 907, 911 (Bankr. D. Wyo. 1998)
(holding property owned as tenancy by the entirety is only exempt if equity exceeds the
total amount of joint debt).
101
Partition means to divide the property into the cotenants’ respective
fractional shares. See generally In re Dahlgren, 418 B.R. 852, 859 (Bankr. D. N.J.
2009).
26
compensation of the trustee, of such sale, according to the interests
of such spouse or co-owners, and of the estate.102
Although each spouse holding property as a tenant by the entirety is considered to
own the whole estate – an indivisible entirety – during his or her life, and neither has a
separate interest therein that can be alienated,103 courts have recognized that this peculiar
form of co-tenancy is based upon the legal fiction that spouses are one person.104 Not
surprisingly then, § 363(h), (i), and (j) illustrates that for certain purposes, Congress has
determined that tenancy by the entirety should be treated like other forms of co-tenancy
when only one spouse has filed for bankruptcy protection. Ultimately, when bankruptcy
cases, either individual or joint, involve property held by spouses as tenants by the
entirety, courts are forced to “balance . . . the notion that the bankruptcy estate is
composed of all legal and equitable interests of the debtorand the fact that tenants by the
entirety own indivisible interests in entireties property.”105
2. Wyoming Bankruptcy Cases Involving Entireties Property
We now turn our attention to the four reported Wyoming cases involving entireties
property in bankruptcy – In re Anselmi, In re Wenande, In re Welty, and In re Jennings –
on which all of the parties rely to one degree or another. Although we conclude that none
102
11 U.S.C. § 363(j).
103
Pet. v. Dona, 54 P.2d 817, 825 (Wyo. 1936). See also Zubrod v. Duncan
(In re Duncan), 329 F.3d 1195, 1201 (10th Cir. 2003).
104
In re Brannon, 476 F.3d 170, 173 (3d Cir. 2007). Even the United States
Supreme Court has referred to state law governing tenancies by the entirety as “peculiar
legal fiction.” United States v. Rodgers, 461 U.S. 677, 703 n.31 (1983).
105
In re Van Der Heide, 164 F.3d 1183, 1185 (8th Cir. 1999).
27
of them, alone or in combination, dictate the result in this appeal, we must begin by
briefly reviewing these four cases.
In Anselmi,106 a married individual filed for chapter 7 bankruptcy protection and
claimed a wide variety of property interests as exempt, alleging they were all held with
his wife as tenants by the entirety. Creditors objected to the debtor’s claimed exemption
in all but two pieces of real property. The bankruptcy court ultimately allowed the
exemption for the real property in absence of objection and concluded, over creditors’
objection, that the debtor’s interests in certain contracts for deed were exempt as entireties
property. The bankruptcy court determined that all other property the debtor claimed as
exempt was not held in tenancy by the entirety and, therefore, not exempt. Anselmi
neither mentions joint debts held by the debtor and his spouse, nor discusses the “amount
of the exemption” to which the debtor was entitled. As a result, although the Anselmi
bankruptcy court’s decision was helpful in determining whether the Account was
entireties property as discussed above, it provides no further guidance here.
In Wenande,107 a husband and wife filed a joint voluntary petition for relief under
chapter 11, but the case was subsequently converted to a case under chapter 7. On their
schedules, the joint debtors claimed an exemption under applicable Wyoming law for the
following as entireties property:
All of the debtor’s property that qualifies [ ], including but not limited to:
stock, mineral interests, real estate, accounts, intangibles and personal
property, which includes, but would not necessarily be limited to the
106
52 B.R. 479 (Bankr. D. Wyo. 1985).
107
In re Wenande, 107 B.R. 770 (Bankr. D. Wyo. 1989).
28
following: 1) all of the debtor’s shares in the Wenande Land & Livestock
Co. Inc., 2) all of the debtor’s shares in the Trail Creek Grazing Assoc.108
The trustee objected, and the bankruptcy court determined that the descriptions of most of
the property were insufficient to entitle the debtors to their claimed exemptions.109 With
respect to the shares in Wenande Land and Livestock Co. Inc. and Trail Creek Grazing
Assoc., the bankruptcy court concluded the trustee had not met his burden of showing the
property was not properly claimed as exempt.
Before analyzing the extent to which those properties were exempt, the bankruptcy
court noted, although there were many recent cases dealing with the status of entireties
property when only one spouse had filed bankruptcy, “there is very little case law on the
status of entireties property in a bankruptcy case filed by both spouses.”110 The
bankruptcy court ruled, because entireties property is not exempt from process under
Wyoming law from claims against both spouses, “to ‘the extent that joint creditors existed
at the filing of the bankruptcy petition, the entireties share is not exempt.’”111 It further
concluded “the amount . . . these joint debtors may exempt . . is their equity in the
entireties property, less the total sum of all joint claims against both debtors,”112 but the
value of the debtors’ entireties property and the amount of their joint debts are not
revealed. Because the analysis is unfortunately not carried out to its logical end, and
particularly because it involved joint debtors, Wenande is also of limited use in resolving
108
Id. at 771.
109
Id. at 773.
110
Id.
111
Id. at 774 (quoting Lawrence Kalevitch, Some Thoughts on Entireties in
Bankruptcy, 60 Am. Bankr. L.J. 141, 150 (Spring, 1986)).
112
Id.
29
the issues before us on appeal. That the whole of the entireties property would be
included in the estate and subject to administration to the extent of the spouses’ joint
debts was the only tenable result because both spouses had filed for bankruptcy
protection. Otherwise, allowing complete exemption of the entireties property and
granting the joint debtors a discharge would be to return to pre-Bankruptcy Code law and
“result in a legal fraud, i.e. the effectual withdrawing of the property from the reach of
those entitled to subject it to their claims, for the beneficial ownership and possession of
those who created the claims against it.”113
Welty114 involved an individual debtor who filed a chapter 13 case. The debtor
claimed various real and personal property as exempt and scheduled a number of joint
obligations with his spouse. The bankruptcy court concluded only two parcels of real
estate were held in tenancy by the entirety and noted the joint debts included secured debt
on the real property and other unsecured debts. Relying on Wenande, the bankruptcy
court concluded “[t]o the extent joint claims exist against [debtor’s] estate and his
nonfiling spouse, the value of the tenancy by the entireties property is not exempt. The
debtor must include this value in the liquidation analysis accompanying his plan, and in
the payments made under the plan.”115 We fail to see how the bankruptcy court’s ruling
in Welty governs the result in our individual debtor chapter 7 case. First, the Welty court
merely assumed, without explanation or analysis, that “Wyoming law is settled and
consistent with other jurisdictions on this question in the context of a chapter 7 case,
113
Phillips v. Krakower, 46 F.2d 764, 765 (4th Cir. 1931).
114
In re Welty, 217 B.R. 907 (Bankr. D. Wyo. 1998).
115
Id. at 911.
30
regardless of whether the spouses are both debtors or one is a nondebtor.”116 Second,
including property in a chapter 13 liquidation analysis and determination of plan
payments is simply not the equivalent of actual liquidation of a non-debtor’s property
interests.
Most recently, in Jennings,117 this Court affirmed the Wyoming bankruptcy court’s
decision in another individual debtor chapter 7 case involving tenancy by the entirety
property and joint debts. In Jennings, the only entireties property claimed as exempt was
the married couple’s home, which was subject to a joint mortgage and an IRS lien for
which both spouses were ultimately determined to have liability. Relying on Wenande,
the bankruptcy court held the debtor could claim the entireties exemption “to the extent
that the equity exceeds the total amount of the debts owed jointly by the debtor and his
non-filing spouse.”118 After the debtor appealed the bankruptcy court’s decision, the
trustee filed an adversary proceeding seeking to sell the entireties property under §
363(h).
On appeal to the BAP, the debtor did not contest the principles of Wenande and,
thus, it was unnecessary for this Court revisit them. Instead, the debtor primarily argued
the trustee could not administer the potentially non-exempt portion of the entireties
property because he may not stand in the shoes of the IRS to challenge the exemption.
The debtor also argued the tenancy by the entirety property was not part of the
116
Welty, 217 B.R. at 911 (citing In re Wenande, 107 B.R. 770 (Bankr. D.
Wyo. 1989) and In re Cochrane, 178 B.R. 1011, 1022 (Bankr. D. Mo. 1995).
117
In re Jennings, No. WY-17-002, 2017 WL 5591463, at *1 (10th Cir. BAP
Nov. 21, 2017) (unpublished), aff’d 739 F. App’x 505 (10th Cir. 2018) (unpublished).
118
Id. at *1.
31
bankruptcy estate due to his non-filing spouse’s interest therein. This Court correctly
rejected both of the debtor’s arguments and affirmed the decision of the bankruptcy court.
Additionally, this Court declined to consider an argument made by the debtor
based on events occurring after the bankruptcy court’s order was entered, namely the
adversary proceeding filed by the trustee under § 363(h). However, in doing so, it noted
“[t]he bankruptcy court may determine whether the [entireties property] can be feasibly
partitioned in kind or whether it must be sold and the proceeds divided between the estate
and the non-debtor spouse,”119 but declined to discuss the issue further as the proceeding
was not complete and the merits were not properly before the Court on appeal.
Additionally, this Court did not address the debtor’s claim that the appealed order
violated the distribution priorities established in § 726(a) of the Code, deeming it
premature because no distribution had occurred.120
The Tenth Circuit Court of Appeals summarily affirmed this Court’s Jennings
decision,121 also declining to consider the debtor’s challenge to the trustee’s anticipated
distributions of assets as irrelevant to the exemption issue,122 as well as the debtor’s
argument that only a judgment creditor has standing to object to his claimed exemption in
the tenancy by the entireties real property.123 This Court’s Jennings decision contains
enough factual details to determine that equity existed in the entireties property over and
above the spouses’ joint mortgage and joint liability to the IRS. However, there is no
119
Id. at *6.
120
Id.
121
In re Jennings, 739 F. App’x 505 (10th Cir. 2018) (unpublished).
122
Id. at 509.
123
Id. at 510.
32
calculation of that equity in Jennings. More importantly, there is no determination as to
whether the entire amount of equity, or only that portion of equity allocable to the
debtor’s interest, is subject to administration by the trustee.
The above discussion illustrates that prior Wyoming bankruptcy decisions
involving entireties property are not completely instructive on the issues presented to the
Bankruptcy Court in this case. Even if it could be argued that these decisions provide the
answers to the questions before us, we note that such cases do not represent controlling
authority that the Bankruptcy Court was bound to follow.124
3. The Bankruptcy Court’s Decision Properly Balances the Interests of
Federal Bankruptcy Law and State Property Law.
After concluding the Centennial Drive residence and the Account were held by
Debtor and Mrs. Crow as tenants by the entirety and qualified for exemption, the
Bankruptcy Court ruled that Mrs. Crow is “entitled to one-half of the exempt entireties
124
“Under principles of stare decisis, a decision of a federal district court
judge or bankruptcy court is not binding precedent in either a different judicial district,
the same judicial district, or even upon the same judge in a different case.” In re Jones,
538 B.R. 844, 848 (Bankr. W.D. Okla. 2015) (first citing Fishman & Tobin, Inc. v.
Tropical Shipping & Constr. Co.,, 240 F.3d 956 (11th Cir. 2001), and then citing
Threadgill v. Armstrong World Indus., Inc., 928 F.2d 1366, 1371 (3d Cir. 1991));
Camreta v. Greene, 563 U.S. 692, 709 n.7 (2011) (quoting 18 J. Moore et al., Moore’s
Fed. Practice § 134.02[1][d], p. 134-26 (3d ed. 2011)); see In re Jones, 298 B.R. 451,
460-61 (Bankr. D. Kan. 2003) (“[T]he bankruptcy courts are not bound by [stare decisis]
to follow any district judge’s decisions either.”). Further, “it is unclear that a Tenth
Circuit BAP opinion is binding precedent on” bankruptcy courts. In re Wenzel, 415 B.R.
510, 516 (Bankr. D. Kan. 2009). Additionally, Jennings is an unpublished opinion that
“may be cited for its persuasive value, but is not precedential, except under the doctrines
of law of the case, claim preclusion, and issue preclusion.” In re Jennings, 2017 WL
5591463, at *1, n.*.
33
property before distribution to the estate.”125 Relying on Welty and Wenande, Trustee
argues the Bankruptcy Court improperly allowed Mrs. Crow to receive one-half of the
entireties property before distributions were made to joint creditors. We disagree.
The Bankruptcy Court’s decision to immunize one-half of the entireties property from
administration by Trustee is based primarily on case law from Missouri bankruptcy courts
and the Eighth Circuit Court of Appeals (“Eighth Circuit”), as well as analogies to §
363(j) of the Code. As is evident from Talbot v. U.S.,126 it is not unusual for Wyoming
courts to rely on Missouri law when addressing issues of tenancy by the entirety127
because Wyoming’s “definition of property held by tenants by the entireties is identical to
the definition of that property interest in Missouri.”128 Further, Missouri, like Wyoming,
clearly exempts entireties property from attachment and execution where only one of the
entirety interest holders is indebted.129 The Missouri case law on which the Bankruptcy
Court relied is much more instructive than the Wyoming bankruptcy case law discussed
above and, therefore, its analysis is more persuasive.
The Bankruptcy Court’s decision emphasizes In re Van Der Heide and In re Eads,
but the results in those cases stem from the earlier case of In re Garner130 and, thus, it
provides the starting point for our analysis. In Garner, an individual chapter 7 debtor held
125
Amended Memorandum Decision on Debtor’s Motion to Allow Use of
Portion of Exempt Funds and Objections to Exemptions Filed by Chapter 7 Trustee and
Radiance Capital Receivables Nineteen, L.L.C. at 15, in Appellant’s App. at 130.
126
850 F. Supp. 969 (D. Wyo. 1984).
127
Id. at 974 (noting that the Wyoming Supreme Court relied upon Missouri
law in Peters v. Dona, 54 P.2d 821, 824-25 (Wyo. 1936)).
128
Id. at 975.
129
In re Eads, 271 B.R. 371, 374-75 (Bankr. W.D. Mo. 2002).
130
952 F.2d 232 (8th Cir. 1991).
34
stock in tenancy by the entirety with his spouse. The debtor sought to exempt the stock
under § 522(b)[3](B), but the trustee objected and pursued turnover. After the Missouri
bankruptcy court’s decision that the stock should be included in the debtor’s estate was
reversed and remanded by the district court, the debtor appealed to the Eight Circuit.
The Eighth Circuit framed the question on appeal as “whether personal property
held in tenancy by the entirety by a debtor and his spouse should be included as property
of the bankruptcy estate when only one spouse is in bankruptcy.”131 It answered the
question in the affirmative, stressing the all-encompassing language of § 541(a).132 In
examining the potential exemption of the entireties property under § 522(b)[3](b), the
Eighth Circuit concluded “that were the question before the Supreme Court of Missouri in
a nonbankruptcy context, that court would not prevent creditors from accessing tenancy
by the entirety property where the entirety owners were jointly indebted to the
creditors.”133 Regarding the disposition of the stock, which had been reduced to cash
before the appeal could be heard, the Eighth Circuit ruled that one-half of the cash
received for the stock must be returned to the non-filing spouse in order to comply with §
363(h) of the Bankruptcy Code that allows partition of co-owned property.134 In doing so,
it emphasized that “returning one-half of the proceeds from the sale of the stock shares to
131
Id. at 233.
132
Id. at 234.
133
Id. at 235.
134
Id. at 236. Although the stock shares had been sold, the Eighth Circuit did
not apply § 363(j), which requires proceeds of a sale to bear costs and expenses prior to
distribution. In the Eighth Circuit’s view, it would not have been impracticable to
partition the stock, in which case, the non-filing spouse’s share would not be reduced by
selling costs and expenses. Id. at n.5.
35
[the non-filing spouse] does not insulate her from creditors pursuing whatever actions
they possess against her.”135
About eight years later, the Eighth Circuit was again faced with the baffling and
bewildering entireties issue, this time in the individual chapter 13 case of In re van der
Heide.136 In this case, the debtor and his spouse owned a home as tenants by the entirety
in which there was equity that, upon sale, would have produced net proceeds after
deduction for transactional costs. For purposes of the liquidation analysis, the debtor
contended only one-half of the hypothetical net proceeds was required to be included in
the bankruptcy estate, but the trustee argued all of the net proceeds were included, less
any applicable exemption. The Missouri bankruptcy court agreed with the trustee and
denied confirmation of the debtor’s chapter 13 plan as not being in the best interests of
creditors as required by § 1325(a)(4). On appeal, the Eighth Circuit reversed,
“conclud[ing] that the rule announced in Garner dictates that only one-half of the
hypothetical sale proceeds, less exemptions, are subject to the bankruptcy estate”137 and
that such “was an equitable rule that preserves the balance of the breadth of federal
bankruptcy and state property law.”138
The bankruptcy courts for both the Eastern and Western Districts of Missouri have
since applied the Garner and Van Der Heide principles to chapter 7 cases filed by only
one spouse. In In re Eads,139 the bankruptcy court was tasked with the “proper division of
135
Id.
136
164 F. 3d 1183 (8th Cir. 1999).
137
Id. at 1184.
138
Id. at 1185.
139
271 B.R. 371 (Bankr. W.D. Mo. 2002).
36
the proceeds from the sale of a residential property owned by the Debtor and his non-
debtor spouse as tenants by the entirety.”140 It held, pursuant to § 363(j) and controlling
Eighth Circuit law, “the net proceeds from the sale of the real estate, after payment of the
transactional costs and the mortgage debts, must be divided equally between the spouses
and the Debtor’s one-half share of those proceeds must be applied by the Trustee to
payment of the parties’ joint debts only.”141 Similarly, in the more recent case of In re
Story,142 the bankruptcy court held that “one-half of the [entireties property] will be
property of the estate [ ] which the Trustee may use to satisfy any debt that is jointly held
by Debtor and [his non-filing spouse].”143
Herein, the Bankruptcy Court was presented with the same issues as described
above—an individual chapter 7 debtor who held certain property with his non-filing
spouse in tenancy by the entirety and is potentially liable on joint obligations. We take no
issue with the Bankruptcy Court applying Missouri bankruptcy case law because
Missouri state law regarding tenancy by the entirety is analogous to that of Wyoming.144
Further, the Bankruptcy Court’s stated objective was to ensure creditors were
treated similarly in bankruptcy as under state law in absence of bankruptcy, a permissible
140
Id. at 372.
141
Id.
142
536 B.R. 279 (Bankr. E.D. Mo. 2015).
143
Id. at 285.
144
In its Amended Exemption Order, the Bankruptcy Court notes that a
previous judge of the Wyoming bankruptcy court held in an earlier unreported decision,
In re Bean, Adv. Pro. 12-2018, (Bankr. D. Wyo. Aug. 2, 2013 and Jan. 10, 2014), that the
non-debtor spouse was entitled to one-half of the interest in tenancy by the entirety
property before the trustee distributed the proceeds. Bankruptcy courts in other
jurisdictions have reached similar results. See, e.g., Finneran v. Assocs. Fin. Servs. (In re
Blair), 151 B.R. 849, 851-53 (Bankr. S.D. Ohio 1992), aff’d 33 F.3d 54 (6th Cir. 1994);
37
goal for a court of equity.145 The Bankruptcy Court’s “conclusion accords with Congress’
intent to bring all of a bankrupt individual’s property interests into the bankruptcy estate
and then equitably protect the nonbankrupt individual’s interest in the property.”146
In sum, the Bankruptcy Court properly navigated the tightrope of tension that exists when
a married individual files bankruptcy holding entireties property, raising that peculiar
legal fiction of state law that the spouses’ interest are held by a single marital entity. We
find no error in the Bankruptcy Court’s decision.
C. The Bankruptcy Court Did Not Err in Concluding an Adversary
Proceeding is Required to Order Turnover of Entireties Property to the
Estate.
The Bankruptcy Court concluded Mrs. Crow continued to have an undivided
interest in Debtor’s share of the entireties property pursuant to Wyoming tenancy by
entireties law.147 Therefore, the Bankruptcy Court denied Trustee’s motion for turnover,
145
See generally BFP v. Resolution Tr. Corp., 511 U.S. 531, 557 n.10 (1994)
(“creditors’ ‘substantive’ state law rights ‘survive’ in bankruptcy, while their ‘procedural’
or ‘remedial’ rights under state debtor-creditor law give way [to bankruptcy law]”); Cent.
States Corp. v. Luther, 215 F.2d 28, 46 (10th Cir. 1954) (“A bankruptcy court is a court
of equity and is guided by equitable principles and doctrines except when they are
inconsistent with the Bankruptcy Act.”); In re Waring, 555 B.R. 754, 758, n.7 (Bankr. D.
Colo. 2016) (explaining § 105 allows bankruptcy courts to “fill in statutory gaps . . .
where the proposed action is not expressly circumscribed and instead is in harmony with
other provisions of the Bankruptcy Code as well as its overriding purpose.”) (internal
citations omitted).
146
In re Garner, 952 F.2d at 235 (explaining § 541 revisions protected a
cotenant’s property rights when property held in tenancy by entirety (citing H.R. Rep. No.
95-595 (1977), reprinted in 1978 U.S.C.C.A.N. 5787, 5963)); In re Jaffe, 932 F.3d 602
(7th Cir. 2019) (quoting Chisnosorn, 243 B.R. at 700 (“[T]he apparent intent of [§
522(b)(3)(b)] is to provide, in bankruptcy, a level of protection from claims of creditors
identical to the protection that owners of entireties property would have in collection
proceedings outside of bankruptcy, under applicable state law.”).
147
Order Denying Trustee[‘s] Motion for Turnover of the Fidelity Account,
Without Prejudice at 1-2, in Appellant’s App. at 131-32.
38
determining that Rule 7001(1) required the parties to bring an adversary proceeding in
order to compel transfer of assets to the estate in which a non-debtor has an interest. On
appeal, Radiance and Trustee argue the Bankruptcy Court’s ruling in this regard is error.
We do not agree. Rule 7001(1) provides that “a proceeding to recover money or property,
other than a proceeding to compel the debtor to deliver property to the trustee, or a
proceeding under § 554(b) or § 725 of the Code, Rule 2017, or Rule 6002” is an
adversary proceeding.148 Trustee argues § 542(a) entitles him to turnover of at least
$1,258,257.48 without need for bringing an adversary proceeding. Trustee’s argument is
based on his assertion that the undisputed amount of joint debt owed by the Crows on the
petition date of $1,807,344.80 exceeds Debtor’s one-half undivided interest
$1,258,257.48 in the Account. We take issue with Trustee’s argument for several reasons.
First, based on representations of the parties at the hearing, the Bankruptcy Court
expressly reserved determination of the amount of joint debt for a future proceeding.
Second, the special nature of tenancy by the entirety property, i.e., that each spouse holds
an undivided ownership in the whole of the property,149 necessarily impacts bankruptcy
procedures when only one spouse is a debtor. As the Bankruptcy Court held, Mrs. Crow
is entitled to one-half the value of the entireties property and additionally retains an
interest in Debtor’s one-half of the entireties properties. Accordingly, Trustee’s motion
for turnover squarely falls into the category of “a proceeding to recover money or
148
Fed. R. Bankr. P. 7001(1).
149
Zubrod v. Duncan (In re Duncan), 329 F.3d 1195, 1201 (10th Cir. 2003)
(“Entirety in this connection means indivisibility.” (quoting Ward Terry & Co. v. Hensen,
297 P.2d 213, 215 (Wyo. 1956))); Case v. Sink & Rise, Inc., 297 P.3d 762, 766 (Wyo.
2013).
39
property, other than a proceeding to compel the debtor to deliver property to the trustee”
requiring an adversary proceeding.150
Further, turnover is not intended to remedy or determine disputed rights of parties
to property of the bankruptcy estate; rather, it is a remedy to be used only to obtain
property that is acknowledged to be property of the debtor’s estate.151 The extent of
litigation over the estate’s and Mrs. Crow’s interests in the Account belies any claim that
turnover is an appropriate mechanism for determining the estate’s interest (and Mrs.
Crow’s interest) therein.
Finally, although Mrs. Crow has intervened in this appeal, she was not a party or
participant in all of the proceedings before the Bankruptcy Court and, thus, was unable to
fully protect her rights in the entireties property. An adversary proceeding will permit the
Bankruptcy Court to obtain jurisdiction over Mrs. Crow and allow her due process before
potentially requiring turnover of the property in which she has an interest.
As a result, we conclude that the Bankruptcy Court did not err in denying
Trustee’s motion for turnover and requiring an adversary proceeding to be filed.
150
In re MF Glob. Inc., 531 B.R. 424, 431 (Bankr. S.D. N.Y. 2015) (citing In
re Perkins, 902 F.2d 1254, 1258 (7th Cir. 1990)). See also 10 Collier on Bankruptcy ¶
7001.02 (16th ed. 2010) (“Proceedings within Rule 7001(1) include actions by trustees . .
. to compel turnover of property of the estate pursuant to section 542(a)[.]”). This is
especially the case given that Trustee seeks to use the assets in which Mrs. Crow has an
interest to pay claims representing individual debts of Debtor.
151
(In re Rubesh, 347 B.R. 115, 2006 WL 1867678 (10th Cir. BAP July 6,
2006) (unpublished).
40
IV. CONCLUSION
Having reviewed the briefs, record on appeal, and applicable law, and applied the
appropriate standard of review, we find no error in the Bankruptcy Court’s analysis or
ruling. Thus, the Bankruptcy Court’s conclusions that (i) Debtor and Mrs. Crow
established and maintained the Account as tenants by the entirety, (ii) the entireties
property may be claimed as exempt pursuant to § 522(b)(3)(B) dependent upon the joint
debt of the Crows, (iii) one-half of the entireties property should be set aside for Mrs.
Crow prior to administration, and (iv) Trustee is required to seek turnover of the entireties
property through an adversary proceeding, are hereby AFFIRMED.
41