In re Britt

• Decision Date: 26 April 2007
• Docket Number: No. 06-30177-8-RDD.,06-30177-8-RDD.
• Citation: 368 B.R. 471
• Court: U.S. Bankruptcy Court — Eastern District of North Carolina
• Parties: In re Billy G. BRITT, Debtor.

368 B.R. 471

In re Billy G. BRITT, Debtor.

No. 06-30177-8-RDD.

United States Bankruptcy Court, E.D. North Carolina, Wilson Division.

April 26, 2007.

Robert E. Fuller, Jr., Goldsboro, NC, for Debtor.

Stephen L Beaman, Stephen L. Beaman, P.A., Wilson, NC, for trustee.

ORDER DENYING OBJECTION TO CLAIM OF EXEMPTIONS

RANDY D. DOUB, Bankruptcy Judge.

This matter is before the court on the objection by the trustee to the debtor's claim of exemptions in 20 mobile homes. The debtor claims an exemption in the homes as tenancy by the entirety property. The trustee alleges that the homes are owned solely by the debtor and are therefore not exempt. A hearing was held in Wilson, North Carolina on April 12, 2007.

At the hearing, the debtor testified that he and his wife, Joann Britt, have been married for forty years, having been married in 1967. Approximately eight years ago, Mr. Gerald Barfield, for whom the debtor had done paving work, approached the debtor about a mobile home park Mr. Barfield had purchased after it had been condemned. Mr. Barfield offered to rent the park to Mr. Britt and also allowed him to take possession of approximately twenty mobile homes on the property which had been abandoned. The debtor testified that, although the conversations with Mr. Barfield regarding the homes did not involve Mrs. Britt, the debtor discussed the opportunity with her before they decided to pursue it, and the debtor considered them to be entering the venture jointly.

The debtor testified that he and his wife pay rent to Mr. Barfield for the property on which the homes are situated. They also pay the county property taxes on the property and the mobile homes. The debtor explained that, because the mobile homes were condemned, there are no titles for them. However, the tax listing for the mobile homes includes the names of the debtor and his wife.

The debtor testified that he and his wife remodeled most of the abandoned mobile homes together and rented them. They operate a business known as "Britt Rentals" from an office located near the mobile home park. His wife manages the business on a daily basis. Both the debtor and his wife participate in the maintenance and remodeling of the homes. They have a joint checking account in the name of the business, from which expenses of the business are paid. The debtor's wife has a Lowe's credit card in the name of the business, which is used to purchase supplies for remodeling and making repairs to the homes.

The debtor admitted that the income and expenses involved with the mobile homes has always been filed on his separate tax returns. The debtor and his wife have always filed separate tax returns. The debtor's wife no longer files a tax return, as her only income is approximately $325.00 per month in Social Security.

Counsel for the debtor argues that the homes are held as a tenancy by the entirety. He refers to N.C. Gen.Stat. § 41-2.5 (2005), which states:

(a) When a husband and wife become co-owners of a mobile home, in the absence of anything to the contrary appearing in the instrument of title, they become tenants by the entirety with all the incidents of an estate by the entirety in real property, including the right of survivorship in the case of death of either.

(b) For the purpose of this section it shall be immaterial whether the property at any particular time shall be classified for any purpose as either real or personal. The provisions of subsection (a) shall not limit or prohibit any other type of ownership otherwise authorized by law.

Counsel argues that, because these mobile homes were taken by the debtor and his wife during the course of their marriage, the debtor and his wife own them as tenants by the entirety. He argues that the evidence presented, including the division of work, the joint checking account, and the tax listing for the mobile homes, all support the premise that the debtor and his wife took these mobile homes together. He further argues that there is nothing to contradict the estate being a tenancy by the entirety, as required by the statute.

Counsel for the debtor also points to the law regarding equitable distribution in this state for guidance as to how ownership of the homes should be treated. He cites the definition of "marital property" in N.C. Gen.Stat. § 50-20 (2005), which includes "all real and personal property acquired by either spouse or both spouses during the course of the marriage...." He further relies on the case of Locklear v. Locklear, 92 N.C.App. 299, 374 S.E.2d 406 (1988), which found that home improvements made by the husband and wife to property owned by a third party, during the course of their marriage, was marital property.

The trustee argues that the intent of the parties must be determined at the time of the transfer. At that time, Mr. Barfield, the grantor, intended to transfer these homes to the debtor and not to the debtor and his wife. The debtor's wife was not present during the discussions between Mr. Barfield and the debtor. There are no documents to indicate that they were transferred to the debtor and his wife either at the time of transfer from Mr. Barfield or subsequently thereto. All evidence supporting joint ownership occurred after the transfer. In response to the debtor's reliance upon Locklear, the trustee points out that the case addresses only home improvements and not the underlying ownership of the property to which the improvements were made.

The trustee and debtor's counsel agree there are no joint unsecured debts for which jointly held property could be liquidated. See Sumy v. Schlossberg, 777 F.2d 921 (4th Cir.1985).

Bankruptcy Rule 4003(c) provides that, in cases involving objections to exemptions, "the objecting party has the burden of proving that the exemptions are not properly claimed." In fact, North Carolina law requires that exemption laws be "liberally construed in favor of the debtor ...." In re Mims, 49 B.R. 283, 286 (Bankr.E.D.N.C.1985) (citing Goodwin v. Claytor, 137 N.C. 224, 49 S.E. 173 (1904); Elmwood v. Elmwood, 295 N.C. 168, 244 S.E.2d 668 (1978); Hyman v. Stern, 43 F.2d 666 (4th Cir.1930); In re Laughing-house, 44 B.R. 789 (Bankr.E.D.N.C.1984); In re Love, 42 B.R. 317 (Bankr.E.D.N.C. 1984)).

The debtor's argument included reliance upon N.C. Gen.Stat. § 50-20, which defines "marital property" for purposes of equitable distribution. The debtor argues that this statute provides that the mobile homes in this case are marital property and, therefore, should be treated as tenancy by the entirety property. However, the law of this district holds that "marital property," as defined for equitable distribution purposes, does not bestow an ownership interest sufficient for which to claim an exemption. See In re Horstman, 276 B.R. 80, 82-83 (Bankr.E.D.N.C.2002). Therefore, N.C. Gen.Stat. § 50-20 and Locklear v. Locklear, 92 N.C.App. 299 374 S.E.2d 406 (1988), are inapplicable to this cage.

The debtor also relies upon N.C. Gen.Stat. § 41-2.5. Although enacted in 1981, there appears to be only one case on record which has applied this statute...