In re Young
| Decision Date | 17 September 1984 |
| Docket Number | Bankruptcy No. 3-84-00310. |
| Citation | 42 BR 892 |
| Parties | In re Rose Ann O'Brien YOUNG, Debtor. |
| Court | U.S. Bankruptcy Court — Eastern District of Tennessee |
Margaret B. Fugate, Johnson City, Tenn., for Trustee.
Robert L. Cheek, Margaret P. Walls, Knoxville, Tenn., for debtor.
At issue is whether the Tennessee homestead exemption statute, Tenn.Code Ann. § 26-2-301 (1980), affords the debtor a homestead exemption in the debtor's interest in property held as a tenant in common.
The debtor and her daughter own as tenants in common a house and lot at 336 Clinchfield Avenue, Erwin, Tennessee. When she filed her chapter 7 petition in bankruptcy on February 24, 1984, the debtor had lived alone in the house for eleven years. She moved out of the house in late April or early May of 1984.
The debtor has asserted a $5,000.00 homestead exemption in the property. The trustee has objected to this exemption.
For many years the Tennessee Supreme Court followed the rule that a tenant in common was not entitled to a homestead exemption in his undivided interest in property. Avans v. Everett, 71 Tenn. 76 (1879); J.I. Case Threshing-Machine Co. v. Joyce, 89 Tenn. 337, 16 S.W. 147 (1890); Kellar v. Kellar, 142 Tenn. 524, 221 S.W. 189 (1920). See also Shanks v. Hardin, 101 F.2d 177 (6th Cir.1939). The court applied the same rule to property held in joint tenancy. Prichard v. Carter, 208 Tenn. 648, 348 S.W.2d 306 (1961). However, it reached a contrary conclusion regarding property held by husband and wife as tenants by the entireties, holding such an interest to be subject to the homestead exemption. Jackson v. Shelton, 89 Tenn. 82, 16 S.W. 142 (1890); Waddy v. Waddy, 200 Tenn. 140, 291 S.W.2d 581 (1956).
In 1979 and 1980 the Tennessee Legislature amended the homestead statute under which the above cases were decided.1 The amended statute provides:
Tenn.Code Ann. § 26-2-301 (1980) (Emphasis added).
The trustee contends that the added language regarding jointly-owned property merely codifies the already established rule permitting the homestead exemption to tenants by the entireties. According to the trustee, the amendments leave unaltered the rule that holders of property as tenants in common are not entitled to the homestead exemption. This court finds otherwise.
The approach taken by the Tennessee courts in the pre-amendment cases is clearly now the minority view. In contrast, the rule followed in most jurisdictions is that one having an undivided interest vested in present enjoyment has a property interest in the premises sufficient for homestead purposes. Annot., 74 A.L.R.2d 1355, 1371-77 (1960); Annot., 89 A.L.R. 511, 540-50 (1934).
In Avans, the seminal Tennessee decision in this regard, the court based its conclusion on the statutorily mandated procedure for setting aside the homestead. Since the statute required the levying officer to summon three freeholders to set apart the homestead and to set out in writing the boundaries of the exempt plot, the court reasoned that such a procedure could not be applied to the undivided interest of a tenant in common:
The statute manifestly contemplates the occupancy of a specific portion of land, capable of being set apart by metes and bounds. It is impossible to apply its provisions to an undivided interest in realty. The debtor owns nothing in severalty, and the creditor could neither ascertain nor of course subject the remainder after setting apart the homestead.
The majority of the court echoed and amplified this basic theme in Joyce. Curiously, in both cases the court acknowledged that the statutes contemplated the possibility that even some property held in severalty might not be capable of being divided so as to physically set apart the homestead. In such a case, as the court noted, the statutes provided for the sale of the entire tract and the setting aside from the proceeds an amount equal to the exemption to be reinvested in a homestead for the debtor. Yet the court was apparently unimpressed by the applicability of an analogous approach to the sale of the undivided interest of a tenant in common. Nonetheless, the applicability of such an approach is clear. It is simply not true that unless the debtor owns the property in severalty, "the creditor could neither ascertain nor . . . subject the remainder after setting apart the homestead." Avans, 71 Tenn. at 78. Perhaps the creditor could not neatly divide the property into physically discrete parcels of land. However, just as where property held in severalty but incapable of division can be sold with the proceeds to be subject to the homestead exemption, so also can the interest of a tenant in common be sold with the proceeds of the sale to be similarly subject to the homestead exemption.
A reading of Joyce and Jackson, both decided in the same year, reveals that the collective mind of the court was far from at ease on this question. The holdings themselves are plain enough—Joyce holding the homestead exemption inapplicable to the interest of a tenant in common and Jackson holding the homestead exemption applicable to the interest of a tenant by the entireties. However, the reasoning of the two cases reveals two essentially irreconcilable and diametrically opposed views on the proper application of the homestead exemption. Justice Snodgrass, writing for the majority in Joyce and dissenting in Jackson, argues for a very narrow and restrictive application limited essentially to property owned in severalty. Justice Caldwell, speaking for the majority in Jackson and the minority in Joyce, opts for a more liberal application extending to all present interests in land. The language of the two majority opinions is thus utterly at odds. Justice Caldwell observes, for example, in Jackson that the right of exemption extends to "`each head of a family owning real estate,' whether in fee, for life, for years, in severalty, in joint tenancy, etc." Jackson, 16 S.W. at 144. Justice Snodgrass in Joyce insists that the statute gives the exemption "to him alone who owns the home or the real estate, in such way that it, or a certain part of it, can at any time be set aside to him against everybody . . . by metes and bounds." Joyce 16 S.W. at 148.
The court never provides a satisfactory basis for its disparate holdings, particularly in light of the current state of the law regarding the respective property rights of husband and wife. In Jackson the court attempts to distinguish a tenancy by the entireties from other modes of joint ownership by noting that "the husband's estate under the deed, augmented by his marital interest in his wife's estate, becomes practically tantamount to the whole estate during their joint lives." Jackson, 16 S.W. at 144.
The court so concludes based upon the assumption that the purchaser at a judicial sale of the husband's interest would also be entitled to the husband's marital rights in the property and thus, to use and occupy the property during the joint lives of the husband and wife, subject only to the wife's right of survivorship. However, the Married Women's Act of 1913 clearly eliminated the archaic restrictions and disabilities of coverture with respect to tenancy by the entireties. A creditor of but one spouse can now levy only upon the spouse's right of survivorship and nothing more. Tenn.Code Ann. § 36-3-504 (1984); Robinson v. Trousdale County, 516 S.W.2d 626 (Tenn.1974).
In truth, there is little of logic, reason, or good sense in distinguishing for purposes of the homestead exemption between tenancy by the entireties and tenancy in common. The creditor of a tenant by the entireties can no more set aside by metes and bounds the interest of that tenant alone than he can physically separate the interest of a tenant in common. In neither case does the tenant own any portion of the land in severalty. No portion of the land is capable of being set aside exclusively to his use nor exclusively to satisfy his debts. In neither case can a creditor reach and sell the entire tract for the debts of only one of the co-tenants. Only the undivided interest of the tenant in common may be levied upon and sold. Earles v. Meaders, 60 Tenn. 248 (1872). Only the survivorship interest of the tenant by the entireties is subject to levy and sale. Robinson, 516 S.W.2d at 632; Waldschmidt v. Hamilton, 32 B.R. 337 (Bankr.M.D.Tenn. 1983...
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