Radiance Capital Receivables Nineteen LLC v. Crow (In re Crow)
| Decision Date | 26 November 2019 |
| Docket Number | BAP No. WY-18-083,Bankr. No. 17-20280,BAP No. WY-18-086 |
| Parties | IN RE THOMAS CROW, Debtor. RADIANCE CAPITAL RECEIVABLES NINETEEN LLC, STEVEN R. BAILEY, Chapter 7 Trustee, Appellants, v. THOMAS CROW, aka Tom Crow and CAROL-ANN CROW, Appellees. |
| Court | Bankruptcy Appellate Panels. U.S. Bankruptcy Appellate Panel, Tenth Circuit |
NOT FOR PUBLICATION*
OPINIONAppeal from the United States Bankruptcy Court for the District of Wyoming
Before CORNISH, HALL, and LOYD,** Bankruptcy Judges.
Several years prior to filing for bankruptcy protection, the chapter 7 debtor and his non-debtor spouse sold their marital home held as tenants by the entirety. Some of the net proceeds were used to purchase a new marital home, and the remainder were transferred to a joint investment account, both of which are also purportedly held as tenants by the entirety. In his bankruptcy case, debtor claimed the marital home and the investment account as exempt under Wyoming's tenancy by entireties exemption. The chapter 7 trustee and a creditor objected to debtor's claimed exemptions.
Balancing the interests of federal bankruptcy and state property law, the Bankruptcy Court overruled the objections, concluding one-half of the entireties properties belonged to the non-debtor spouse, and debtor's one-half of the entireties property was potentially subject to administration as non-exempt. The Bankruptcy Court further ruled the non-exempt portion was dependent upon joint debt, and the trustee was required to pursue turnover of the entireties property in an adversary proceeding. Both the chapter 7 trustee and the creditor appealed. Finding no error in the Bankruptcy Court's decision, we AFFIRM.
Thomas Crow ("Debtor"), a retired Australian professional golfer, founded Cobra Golf in the 1970s. After making a fortune manufacturing and selling innovative golf clubs, Debtor sold the business in the mid-1990s and moved to Jackson, Wyoming where he lived with his wife, Carol-Ann Crow (individually, "Mrs. Crow," and collectively with Debtor, the "Crows"). The Crows resided at North Deland Drive in Jackson, and title tothe Deland Drive residence was vested in the Crows as husband and wife, tenants by the entirety, according to Wyoming law.1
At some point the Crows suffered a financial crisis, and in 2008, their daughter and son-in-law, Annabelle and Jeff Marvin (individually, "Mrs. Marvin" or "Mr. Marvin," collectively, the "Marvins"), loaned them $1,000,000.2 The loan was made by Marvin Investment Partners to various trusts the Crows had created. The purpose of the loan was to pay expenses and enable the Crows to remain in their home.3
On April 29, 2015, the Crows sold the Deland Drive residence for $10,000,000, realizing $5,171,813.61 in net proceeds from the sale. The Crows then purchased a residence at North Centennial Drive, also in Jackson, Teton County, Wyoming, for $1,550,000.4 The Crows took out a mortgage for $500,000 against the Centennial Drive residence and paid the rest of the purchase price with proceeds from the sale of the Deland Drive residence.
Advanced in age, the Crows sought the assistance of the Marvins to invest the remaining Deland Drive sale proceeds. With Mr. Marvin's help, the Crows opened a brokerage account (the "Account") with Fidelity Investments ("Fidelity"). In the Application for a New Fidelity Account, the Crows indicated "Account Type" as"TENANTS BY THE ENTIRETY."5 However, on the application, tenants by the entirety is crossed out and beside it, "Thomas L. Crow And Carol Ann Crow, Husband & Wife, as tenants by the entirety," is handwritten.6 Mrs. Marvin had the authority to act on behalf of the Crows with respect to the Account as she was appointed attorney-in-fact under a Fidelity Durable Power of Attorney. As of May 31, 2015, the Account had a balance of approximately $3.5 million.
During 2015 and 2016, Mrs. Marvin transferred almost $900,000 from the Account directly to the Marvins or to third parties for their benefit.7 The Marvins considered these disbursements to be repayment of the $1,000,000 loan made to the Crows in 2008 by Marvin Investment Partners.8
In late 2016, creditor Radiance Capital Receivables Nineteen, LLC ("Radiance") began attempting to collect on a judgment against Debtor. The judgment stemmed from Debtor's personal guarantee of a $1.5 million promissory note made by The Thomas L. Crow Family Limited Partnership.9 Upon default, the holder of the note, 2010-1 RADC/CADC VENTURE, LLC, obtained a judgment against Debtor in Routt County, Colorado District Court on July 5, 2013.10 The judgment was subsequently assigned toRadiance who registered it in Teton County, Wyoming. Radiance then served a notice of garnishment on Fidelity attempting to reach assets in the Account, which prompted Debtor to file for bankruptcy protection on April 18, 2017. Steven R. Bailey ("Trustee") was appointed as chapter 7 trustee in Debtor's case.
Debtor listed the Centennial Drive residence, valued at $1,282,706, and the Account, valued at $2,516,514.97, on Schedule B. On Schedule C, Debtor claimed both the Centennial Drive residence and the Account as 100% exempt pursuant to 11 U.S.C. § 522(b)(3)(B)11 and Wyoming's tenancy by the entirety exemption.12 Trustee and Radiance objected to Debtor's claimed exemption in the Account, arguing the exemption did not apply because the Account was not created as a tenancy by the entirety.13 Further, both objecting parties argued that, even if the Account was created as a tenancy by the entirety, Debtor and Mrs. Crow had subsequently severed the Account's tenancy by the entirety status and forfeited its associated protections.
The Bankruptcy Court conducted an evidentiary hearing on the objections to exemption on October 31, 2017. After hearing closing arguments by telephone and taking the matter under advisement, the Bankruptcy Court issued a memorandum decision overruling the objections to Debtor's claimed exemption on April 4, 2018 (the"Exemption Order").14 In the Exemption Order, the Bankruptcy Court found the Account application evidenced Debtor's intent to create a tenancy by the entirety and, therefore, concluded Wyoming's tenancy by the entirety exemption applied to the Account. The Bankruptcy Court also found the transfers to the Marvins and other Account activity did not sever the Account's entireties status. As a result, the Bankruptcy Court "allow[ed] the Debtor's tenants by the entirety exemption as to the [Account] and the Centennial [Drive] real property."15 However, the Bankruptcy Court acknowledged that 16 Because the parties sought to address the amount of joint debt in a separate proceeding, the Bankruptcy Court reserved such determination and ordered that "the amount of the exemption will be resolved upon a determination of the amount of joint debt."17
Debtor filed a Motion for Further Findings and/or to Clarify Memorandum Decision (the "Motion for Clarification") pursuant to Federal Rules of BankruptcyProcedure 9023 and 7052.18 Mrs. Crow joined in the Motion for Clarification.19 The Motion for Clarification asserted there was no joint debt left to be determined because there were no timely filed proof of claims asserting joint liabilities.20 Trustee objected to Debtor's Motion for Clarification, arguing there was a total of $1,807,344.80 in joint debt based on the mortgage secured by the Centennial Drive residence and the promissory note to Marvin Investment Partners,21 thereby rendering such portion of the Account non-exempt.22 Trustee also filed his Motion for Entry of an Order Requiring the Transfer of $1,807,344.80 in Funds from the Fidelity Account Based on the Court's April 4, 2018 Memorandum Decision (the "Turnover Motion"), requesting turnover of that amount for payment of joint debts.23
The Bankruptcy Court issued two orders in response to these motions. First, the Bankruptcy Court amended its Exemption Order, clarifying Mrs. Crow was which is to be determined (the "Amended Exemption Order").24 Second, the Bankruptcy Court denied the Turnover Motion and required Trustee to seek turnover of the entireties property through an adversary proceeding (the "Adversary Order").25 The Bankruptcy Court concluded, because the assets involved were held in tenancy by the entirety by Debtor and Mrs. Crow, a non-debtor, Rule 7001(1) required Trustee to bring an adversary proceeding "to recover money" pursuant to § 542(a).26 Both Radiance and Trustee now appeal these determinations by the Bankruptcy Court.
Radiance and Trustee each filed appeals of the Exemption Order, the Amended Exemption Order, and the Adversary Order. The two appeals were companioned for purposes of briefing and argument, and the Court allowed Mrs. Crow to intervene as an appellee in both appeals.27
"With the consent of the parties, this Court has jurisdiction to hear timely-filed appeals from 'final judgments, orders, and decrees' of bankruptcy courts within the Tenth Circuit"28 and "with leave of the court, from other interlocutory orders and decrees."29After entering an order to show cause regarding finality of the appealed orders and considering the responses thereto, a motions panel of this Court concluded the Adversary Order was a final order,30 but that the Exemption Order and Amended Exemption Order were interlocutory. However, the motions panel granted leave to appeal pursuant to 28 U.S.C. § 158(a)(3), concluding the appeals addressed a controlling question of law as to which...
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