Opinion ID: 74248
Heading Depth: 3
Heading Rank: 1

Heading: the tenancy-by-the-entireties exemption

Text: Havoco does not contest the bankruptcy court's finding that the household furnishings in question are owned by Hill and his wife as tenants by the entireties. A 8 tenant by the entireties holds “an indivisible right to own and occupy the entire property.” United States v. 15621 S.W. 209th Ave., Miami, Fla., 894 F.2d 1511, 1515 (11th Cir. 1990) (holding that property used by its owner to facilitate a controlled substance transaction is exempt from forfeiture when held by the entireties with an innocent spouse). Under Florida law, “[n]either spouse can sell, forfeit or encumber any part of the estate without the consent of the other, nor can one spouse alone lease it or contract for its disposition.” Id. at 1514 (quoting Parrish v. Swearington, 379 So.2d 185,186 (Fla. Dist. Ct. App. 1980) (per curiam)). Further “[c]reditors cannot levy on entireties property to satisfy the debt of an individual spouse.” Id. at 1515. see also First Nat. Bank of Leesburg v. Hector Supply Co., 254 So.2d 777, 781 (Fla. 1971) (refusing to allow a bank account held in tenancy-by-the-entireties to be garnished as a result of the individual debts of one tenant). In accordance with these principles, property held by a debtor as a tenant-bythe-entireties is exempt from the claims of individual creditors in bankruptcy under Florida common law. See 11 U.S.C. § 522(b)(2)(B)5. See also In re Hendricks, 237 5 § 522(b)(2)(b) provides in pertinent part: Notwithstanding section 541 of this title, an individual debtor may exempt from property of the estate ... (2)(b) any interest in property in which the debtor had, immediately before the commencement of the case, an 9 B.R. 821, 824 (Bankr. M.D. Fla. 1999). Cf. Sumy v. Scholssberg, 777 F.2d 921, 928 (4th Cir. 1985) (interpreting Maryland law). However, when tenancy-by-the-entireties property is created via a fraudulent conveyance, it may be avoided as such. See Thomas J. Konrad & Assoc., Inc. v. McCoy, 705 So.2d 948 (Fla Dist. Ct. App. 1998); Valdivia v. Valdivia, 593 So.2d 1190, 1192 (Fla. Dist. Ct. App. 1992). See also In re Hendricks, 237 B.R. at 824. Avoiding the transfer which created a tenancy-by-the-entireties will necessarily eliminate the property rights of one of the tenants. Therefore, a court may not avoid such a transfer, and thereby make the tenancy-by-the-entireties property available to the creditors of one tenant, without affording both tenants their rights to due process. Accordingly, a plaintiff seeking to avoid the creation of tenancy-by-the-entireties property on the basis that the estate resulted from a fraudulent transfer “must join both tenants in the proceedings.” Ellis Sarasota Bank & Trust Co. v. Nevins, 409 So.2d 178, 180 (Fla. Dist. Ct. App. 1982) (requiring joinder of the debtor's wife in proceedings “before an entireties account can be made available to answer for the judgment debts of one of the tenants individually”). Havoco suggests that a interest as a tenant by the entirety or joint tenant to the extent that such interest as a tenant by the entirety or joint tenant is exempt from process under applicable nonbankruptcy law. 10 tenancy-by-the-entireties exemption in bankruptcy can be adjudicated in the same manner as any other objection to an exemption and that joinder of Hill's wife is unnecessary because Hill, by himself, can raise all the “defenses” in the objection proceeding which he or his wife could raise in an adversary proceeding. Havoco further argues that Hill's wife could intervene in the objection proceeding or file her own declaratory proceeding in the bankruptcy court. However, Havoco does not provide, nor are we able to find, any legal support for its suggestions. Havoco further asserts that requiring it to challenge Hill’s tenancy-by-the-entireties exception in an adversary proceeding “merely exalts form over substance.” Havoco is correct that in its observation “that the distinction between setting aside a transfer as fraudulent and declaring an otherwise exempt asset to be non-exempt achieves, from their perspective, the same outcome.” However, “it is ... a very real distinction that is provided for by Florida law.” Levine v. Weissing, 134 F.3d 1046, 1052 (11th Cir. 1998). Moreover, we do not believe that Hill's wife's due process rights are adequately preserved in a proceeding to which she is not a party and in which her property rights may effectively be terminated.6 See Meyer v. Faust, 83 So.2d 847, 848 6 If Havoco's objection to Hill's exemption of the home furnishings from the bankruptcy estate as tenancy-by-the-entireties property succeeds, the home furnishings will become a part of the bankruptcy estate, available to satisfy Hill's individual creditors, and, consequently, Hill's wife’s property interest in the home furnishings will be effectively terminated. 11 (Fla. 1955); see also Logan v. Zimmerman Brush Co., 455 U.S. 422, 433-434, 102 S. Ct. 1148, 1156-1157, 71 L. Ed. 2d 265 (1982) (holding that the State may not finally destroy a property interest without first giving the putative owner an opportunity to present his claim). Additionally, Bankruptcy Rule 7001 requires a bankruptcy trustee to initiate adversary proceedings to avoid transfers by the debtor under section 548 of the Bankruptcy Code. See 11 U.S.C. § 548. Florida's fraudulent conveyance statute is sufficiently similar to § 548 to expect federal bankruptcy courts to apply comparable procedures when considering whether to avoid a purportedly fraudulent transfer under Florida law.7 Cf. In re Golden Plan of California, Inc., 829 F.2d 705, 711 (9th Cir. 1986) (“emphasizing that the trustee’s initiation of adversary proceedings was a prerequisite to a legitimate exercise of its avoidance powers”) . Therefore, we agree with the district court that Havoco must seek to avoid the transfer by which Hill transformed his individual property into home furnishings owned with his wife as tenants-by-the-entireties through an adversary proceeding to which Hill's wife may be made a party.