In re Hinton, Bankruptcy No. 6:07-bk-880-KSJ.

• Decision Date: 01 October 2007
• Docket Number: Bankruptcy No. 6:07-bk-880-KSJ.,Adversary No. 6:07-ap-00039-KSJ.
• Citation: 378 B.R. 371
• Parties: In re James Allen HINTON, Debtor. Drew Dillworth, not individually but as Chapter 7 trustee of the Debtor, James Allen Hinton, and King Acquisitions, LLC, a Florida limited liability company, Plaintiffs, v. James Allen Hinton, an individual, and Susan C. Hinton, an individual, Defendants.
• Court: U.S. Bankruptcy Court — Middle District of Florida

378 B.R. 371

In re James Allen HINTON, Debtor.

Drew Dillworth, not individually but as Chapter 7 trustee of the Debtor, James Allen Hinton, and King Acquisitions, LLC, a Florida limited liability company, Plaintiffs, v. James Allen Hinton, an individual, and Susan C. Hinton, an individual, Defendants.

Bankruptcy No. 6:07-bk-880-KSJ.

Adversary No. 6:07-ap-00039-KSJ.

United States Bankruptcy Court, M.D. Florida, Orlando Division.

October 1, 2007.

Carlos E. Sardi, David C. Cimo, Genovese Joblove & Batista, PA, Miami, FL, Elizabeth A. Green, Latham Shuker Eden & Beaudine LLP, Orlando, FL, for Plaintiff, King Acquisitions, LLC.

Frank M. Wolff, Jeanne A. Kraft, Wolff Hill McFarlin & Herron PA, Orlando, FL, for Defendants.

Roy S. Kobert, Broad & Cassel, P.A., Orlando, FL, Patricia Ann Redmond, Stearns Weaver Miller Weissler Alhadeff & Sitterson, P.A., Miami, FL, for Chapter 7 Trustee Drew M. Dillworth.

Miriam G. Suarez, United States Trustee, Orlando, FL, for U.S. Trustee.

MEMORANDUM OPINION PARTIALY GRANTING AND PARTIALLY DENYING DEFENDANTS' PARTIAL MOTION FOR SUMMARY JUDGMENT

KAREN S. JENNEMANN, Bankruptcy Judge.

The defendants, James and Susan Hinton, seek a summary judgment (Doc. No. 35) (the "Motion") that their interests in their home and large federal tax refunds, owned by them as tenants by the entireties, are not subject to curtailment as fraudulent transfers under Section 522(o) of the Bankruptcy Code¹ or to administration pursuant to Section 56.29 of the Florida Statutes. The plaintiffs, the Chapter 7 trustee, and a creditor, King Acquisitions, LLC, dispute the defendants' position (Doc. No. 51). The facts are relatively straightforward.

James Hinton filed this Chapter 7 case on March 9, 2007 (the "Petition Date"). Susan, his wife of almost 35 years, did not join in the bankruptcy petition. With the exception of a very small joint federal tax obligation, the parties have no jointly held unsecured debts.

Rather, James filed this case to address debts arising from his prior business of owning, operating, and controlling multiple Burger King and other food related franchises throughout Texas and South Carolina. By 2001, the debtor's businesses largely had failed, and numerous major creditors were suing him.² On September 4, 2003, King Acquisitions, Inc. ("KAL"), as assignee and one of the plaintiffs in this adversary proceeding, obtained a judgment against the debtor in an amount exceeding $2.4 million. KAL since has tried to collect upon the judgment. Now, with the filing of this bankruptcy case, the Chapter 7 trustee is joining in the collection efforts.³

After living and working for many years in South Carolina, the Hintons moved to Florida on October 31, 2001. The Hintons purchased an 8,500 square foot home for $1.6 million in cash.⁴ The house was titled to "James A. Hinton and Susan C. Hinton, Husband and Wife" (the "Florida Home") (Doc. No. 35, Exhibit A).

During the Hinton's 35 year marriage, they always filed joint tax returns. For the tax years 1997, 1998, and 2001, the couple received three separate refund checks totaling $483,292 (the "Tax Refunds"). Each check was made payable to "James A & Susan Clark Hinton." (Doc. No. 35, Exhibits F and I).⁵

The Hintons deposited the Tax Refunds into their financial account with the Bank of America with the exception that the Hintons used $116,518 to buy a certificate of deposit at Countrywide Bank. The Bank of America account is titled in the names of James and Susan Hinton and is specifically designated as a tenancy by the entireties account. Similarly, the Countrywide CD was jointly titled as "POD," assumedly "payable on death." The Countrywide CD and the Bank of America account will be referenced simply as the "Accounts." The debtor claimed all funds in the Accounts on the Petition Date as exempt property, contending he owned the funds with his wife as tenants by the entireties.

In this and related adversary proceedings,⁶ the plaintiffs argue that the Hintons' purchase of the Florida Hoipe was effected by at least one, and perhaps several, fraudulent transfers, and that, therefore, the debtor's claim of exemption as tenants by the entirety is invalid pursuant to Bankruptcy Code Section 522(o). Hinton allegedly simply funneled the liquidation proceeds from his nonexempt, individually held, business interests into the Florida Home he purchased with Susan in order to obtain tenancy by the entireties protection of the proceeds. The plaintiffs argue that Chapter 726 of the Florida Statutes, Bankruptcy Code Section 522(o) and, alternatively, Florida Statute Section 56.29, entitle them to avoid the debtor's transfer of his nonexempt assets into the Florida Home and to administer the debtor's interest in the Tax Refunds.

In the defendants' Motion for Partial Summary Judgment (Doc. No. 35), the defendants raise three issues. First, they assert that the Tax Refunds are properly exempt as property owned by them as tenants by the entireties. Second, they assert that Section 522(o) of the Bankruptcy Code does not limit the debtor's ability to claim the tenancy by the entireties exemption in the Florida Home. Third, they assert that the plaintiffs' claims to avoid the purchase of the Florida Home as a fraudulent transfer are barred by the four-year statute of limitation contained in Chapter 726. For the reasons explained below, the Court will partially grant the defendants' motion finding that the Tax Refunds are properly claimed as exempt property and that Section 522(o) of the Bankruptcy Code does not limit the defendants' right to claim as exempt the Florida Home, but will partially deny the motion as to whether the applicable statute of limitation under Section 726 of the Florida Statutes has expired.

Summary Judgment Standard. Pursuant to Federal Rule of Civil Procedure 56, which is applicable under the Federal Rule of Bankruptcy Procedure 7056, a court may grant summary judgment where "there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law." Fed. R.Civ.P. 56. The moving party has the burden of establishing the right to summary judgment. Fitzpatrick v. Schiltz (In re Schiltz), 97 B.R. 671, 672 (Bankr. N.D.Ga.1986). In determining entitlement to summary judgment, a court must view all evidence and make all reasonable inferences in favor of the party opposing the motion. Haves v. City of Miami, 52 F.3d 918, 921 (11th Cir.1995) (citing Dibrell Bros. Int'l S.A. v. Banca Nazionale Del Lavoro, 38 F.3d 1571, 1578 (11th Cir. 1994)). Therefore, a material factual dispute precludes summary judgment. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). When opposing a motion for summary judgment, a party may not simply rest on the pleadings but must demonstrate the existence of elements essential to the nonmoving party's case and for which the nonmoving party will bear the burden of proof at trial. See Celotex Corp. v. Catrett, 477 U.S. 317, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986) (cert. denied, 484 U.S. 1066, 108 S.Ct. 1028, 98 L.Ed.2d 992 (1988)).

Legal Standard for Florida's Tenancy by the Entireties Exemption. All of the issues raised by the defendants' motion revolve around the powerful and somewhat unique ownership allowed between husbands and wives in Florida-tenancy by the entireties. Section 522(b)(3)(B) of the Bankruptcy Code allows a debtor to exclude from property of his bankruptcy estate "any interest in property in which the debtor had, immediately before the commencement of the case, an interest as a tenant by the entirety ... to the extent that such interest is exempt from process under applicable nonbankruptcy law." 11 U.S.C. § 522(b)(2)(B). Here, the relevant applicable nonbankruptcy law is Florida law, pursuant to which the Court must evaluate the debtor's claim of exemption. In re Sinnreich, 391 F.3d 1295, 1297 (11th Cir.2004) ("The nature of a bankrupt's interest in property is determined by state law.") (citing Butner v. United States, 440 U.S. 48, 55, 99 S.Ct. 914, 59 L.Ed.2d 136 (1979)).

In Florida, real and personal property acquired by a married couple is afforded a presumption of tenancy by the entireties ownership. Beal Bank, SSB v. Almand and Associates, 780 So.2d 45, 52 (Fla.2001) (recognizing history of tenancy by the entireties presumption in real property, and concluding that the presumption also applies to financial accounts); In re Daniels, 309 B.R. 54 (Bankr.M.D.Fla.2004) (extending presumption to all personal property); In re Kossow, 325 B.R. 478, 485 (Bankr.S.D.Fla.2005) (finding that the policy justifications offered in Beal Bank should be applied to all personalty, including federal tax refunds); contra In re McAnany, 294 B.R. 406, 408, Bankr. N.D.Fla.2003 (declining to extend the presumption to all personal property other than joint bank accounts). With respect to real property, when such "is acquired specifically in the name of a husband and wife, it is considered to be a `rule of construction that a tenancy by the entireties is created, although fraud may be proven.'" Beal Bank, 780 So.2d at 54 (citing First Nat. Bank of Leesburg v. Hector Supply Co., 254 So.2d 777, 780 (Fla.1971)). Ownership of real property "in the name of both spouses vests title in them as tenants by the entireties." Beal Bank, 780 So.2d at 54 (citing Losey v. Losey, 221 So.2d 417, 418 (Fla.1969)). "Thus, [a] conveyance to spouses as husband and wife creates an estate by the entirety in the absence of express language showing a contrary intent." Beal Bank, 780 So.2d at 54 (citation and internal quotations omitted). Similarly, in the "absence of any controlling statute, express agreement, account statement, or other governing indicia that explicitly establishes a form of ownership other than tenancy by the entireties," Beal Bank's presumption also is applicable to all personal property. Daniels, 309 B.R. at 59.

In Florida, "[p]roperty held as a...