In re Manicure, Bankruptcy No. 7-81-01113
| Decision Date | 15 April 1983 |
| Docket Number | 7-81-01114.,Bankruptcy No. 7-81-01113 |
| Citation | 29 BR 248 |
| Parties | In re James Edward MANICURE, Debtor. In re Harold Loyd RINGLEY, Debtor. |
| Court | U.S. Bankruptcy Court — Western District of Virginia |
Tyler M. Moore, Douglas D. Wilson, Roanoke, Va., for debtors.
John E. Kieffer, James J. Burns, Bristol, Va., for creditor.
Robert E. Wick, Jr., Bristol, Va., trustee.
This matter comes on upon the filing by CIT Corporation, a creditor, of objections to exemptions claimed by the respective Debtors, James Edward Manicure and Harold Loyd Ringley. After a joint hearing on the objections in the cases, the Court makes the following determination.
In October 1974, Manicure and Ringley formed a partnership under the name of Ringley and Mancuso Coal Producers. The partnership engaged in the coal operation business and operated several strip mines in the vicinity of Wise County, Virginia. The business experienced financial difficulties and in the fall of 1980, equipment companies began reclaiming their equipment from the partnership. Manicure and Ringley each filed voluntary Chapter 7 petitions in this Court on September 10, 1981. In their respective petitions, each Debtor claimed as exempt property his interest in a family residence located in Wise County, Virginia and a condominium unit in New Smyrna Beach, Florida. Pursuant to Title 38.1 of the Code of Virginia, each Debtor further claimed as exempt the loan or cash surrender value in certain life insurance policies which named family members as beneficiaries. CIT filed objections to these exemptions in October of 1981. Several other creditors subsequently filed objections, but these were disallowed as not timely filed in accordance with the First Meeting of Creditors Notice and Local Bankruptcy Rule 4005.
The Debtor maintains his undivided interest in his Virginia residence is exempt under 11 U.S.C. § 522(b)(2)(B) as the property is held with his wife, Wanda Hall Manicure, by the entireties. CIT asserts that the property is not held by the entireties because it is not so specified in the deed.
In Virginia, when real property is conveyed to a husband and wife, the deed must specify that a tenancy by the entirety is intended or a tenancy in common results. Va.Code § 55-20 (1981 Repl.Vol.) The deed in question was introduced into evidence at trial; this deed is dated October 10, 1968 and was properly recorded in the Clerk's Office of the Circuit Court of Wise County, Virginia. The subject deed is between E.D. Vicars, Jr. et al. ("parties of the first part") and James E. Manicure and Wanda H. Manicure, his wife ("parties of the second part"). Title to the property was taken as follows: "Said parties of the first part . . . do hereby grant, bargain, sell and convey, with covenants of GENERAL WARRANTY of title unto the said parties of the second part, all those two (2) certain lots . . .". There is no language in the deed evidencing an intent to create a tenancy by the entirety. Although Manicure apparently believed that the property was held by the entireties, counsel for the Debtor concedes that this is not clearly stated by the language of the deed.
Alternatively, counsel for Manicure argues that the Debtor's interest in the Virginia residence is exempt because the equity in the home is traceable to proceeds derived from the sale of a previous residence which was held by the Debtor and his wife as tenants by the entireties. Counsel cites the case of Oliver v. Givens, 204 Va. 123, 129 S.E.2d 661 (1963) in support of its position, wherein the Virginia Supreme Court held that "proceeds derived from the voluntary sale of real estate held by the entireties are likewise held by the entireties." Counsel attempted to introduce the deed to the Manicures' prior residence held by the entireties, but the objection to the introduction was sustained by the Court. Had this deed been admitted and considered, the Court would nevertheless decline to accept the argument advanced. The holding in Oliver applies to sales proceeds which remained in cash form and were deposited into a bank account in the wife's name only, not to the portion of the sales funds used to purchase other property. Once funds of this nature are used to purchase real property, as in the instant case, they lose their character as "proceeds" which can be traced back to the tenancy by the entirety. Instead, we must look to the language of the deed to the real property purchased with these funds to determine the nature of the interest held by the parties. To hold otherwise would create chaos with the property and conveyancing laws of the state.
The Court concludes that the Virginia residence of James Manicure and his wife is not held by the entireties and the interest of the Debtor is, therefore, an asset of the bankruptcy estate to be administered by the Trustee as he may deem proper. The Trustee may choose to abandon said property as there appears to be little or no equity; such action by the Trustee would render this matter moot.
Harold Ringley and his wife, Alma Jean Ringley, purchased a home in Wise County, Virginia in 1963 as tenants in common. During the settlement of his mother-in-law's estate, Ringley was made aware of the problems involved with the transfer of realty held as tenants in common. For personal estate planning reasons, Ringley and his wife executed a deed converting their property to a tenancy by the entirety with the incumbent right of survivorship. This deed was properly recorded in the Clerk's Office of the Circuit Court of Wise County, Virginia on April 18, 1980. In his bankruptcy petition, Ringley claimed his undivided interest in this property as exempt pursuant to 11 U.S.C. § 522(b)(2)(B).
Section 522(b)(2)(B) provides that an individual debtor may exempt from property of the estate such interest that the debtor had "immediately before the commencement of the case" to the extent that such interest is exempt from process under applicable nonbankruptcy law. Under Virginia law, property held by the entireties is immune from individual creditor attack. Vasilion v. Vasilion, 192 Va. 735, 66 S.E.2d 599 (1951). CIT Corporation is attempting to attack the exemption claimed by the Debtor by challenging the underlying transfer that created the tenancy by the entirety. CIT contends that this transfer may be avoided under state law as fraudulent and voluntary, and is therefore avoidable under 11 U.S.C. § 544(b).
A challenge to the propriety of the transfer creating the tenancy by the entirety is a matter that the Trustee only can pursue under § 544(b). Unless the Trustee in this case institutes a proper adversary proceeding (pursuant to his duties under § 704) within 30 days from this date to recover an allegedly fraudulent or voluntary transfer for the benefit of the creditors, the entireties property claimed as exempt under § 522(b)(2)(B) will be so adjudged. See also Bass v. Thacker, 5 B.R. 592 (Bkrtcy.W.D.Va.1980)
In the early summer of 1978, the Manicures and the Ringleys took options to purchase two separate condominium units located in Volusia County, Florida. The units were not completed until sometime in January 1979, at which time title to the properties was taken in the partnership name to minimize partnership taxes. Several months later it was determined that the amount of the monthly mortgage payments was creating a strain on the cash flow of the partnership. Consequently, the partnership deeded the units, one each, to the individual partners in April of 1979. Each partner subsequently transferred his unit to himself and his wife. The Manicure deed is dated June 19, 1979 and the Ringley deed is dated February 7, 1980; both deeds were properly recorded. Each Debtor claimed his undivided interest in his respective Florida condominium unit as exempt property under § 522(b)(2)(B).
The Court must look to Florida law to determine whether the property as deeded to the Debtors and their wives is held by the entireties. Florida Statute § 689.11(1), as amended, provides in pertinent part:
There is no requirement under Florida law that any "magic words" or "words of art" be used to create entireties property. Absent the expression of any contrary intent, the deed to a man and woman described as husband and wife is sufficient to create an tenancy by the entirety. In re Estate of Silvian, 347 So.2d 632 (4th DCA Fla.1977). Further, as in Virginia, property held under Florida law as tenants by the entireties is exempt from process by individual creditors. In re Lunger, 5 C.B.C.2d 43, 8 B.C.D. 11, 14 B.R. 6 (Bkrtcy.M.D.Fla.1981).
There is no controversy that the language in the Florida deeds held by the Manicures and the Ringleys created entireties property. CIT objects to the exemption of the Florida condominiums for the reason that the transfers from Manicure and Ringley to themselves and their wives are avoidable under the Florida fraudulent and voluntary conveyance statutes and may therefore be avoided under 11 U.S.C. § 544(b).
The Trustee is the only party who can seek avoidance under § 544(b). Unless the Trustee in the instant cases institutes proper adversary proceedings within 30 days from this date to recover allegedly fraudulent or voluntary conveyances by the Debtors, the entireties properly claimed as exempt pursuant to § 522(b)(2)(B) shall be so adjudged.
By stipulation entered into the record, it was established that the Debtors own the following life insurance policies:
Cash
Surrender
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