Sovran Bank, N.A. v. Anderson, 83-1296

• Decision Date: 11 September 1984
• Docket Number: No. 83-1296,83-1296
• Citation: 743 F.2d 223
• Parties: 11 Collier Bankr.Cas.2d 748, 12 Bankr.Ct.Dec. 474, Bankr. L. Rep. P 70,035 SOVRAN BANK, N.A., Appellee, v. Darl Duane ANDERSON, individually, and F/T/A Anderson Electronics and Engineering, Appellant, and Dean W. Sword, Jr., Trustee, Defendant.
• Court: U.S. Court of Appeals — Fourth Circuit

Page 223

743 F.2d 223

11 Collier Bankr.Cas.2d 748, 12 Bankr.Ct.Dec. 474,

Bankr. L. Rep. P 70,035

SOVRAN BANK, N.A., Appellee, v. Darl Duane ANDERSON, individually, and F/T/A Anderson Electronics and Engineering, Appellant and Dean W. Sword, Jr., Trustee, Defendant.

No. 83-1296.

United States Court of Appeals Fourth Circuit.

Argued Jan. 9, 1984.

Decided Sept. 11, 1984.

Alexander P. Smith, Norfolk, Va. (Smith & Owens, Norfolk, Va., on brief), for appellant.

David H. Adams, Norfolk, Va. (Taylor, Walker & Adams, Norfolk, Va., on brief), for appellee.

Before WIDENER and ERVIN, Circuit Judges, and HAYNSWORTH, Senior Circuit Judge.

WIDENER, Circuit Judge:

Anderson filed his petition in bankruptcy for relief under Chapter 7 of the Bankruptcy Code, claiming as exempt his equity in his residence which he and his wife own as tenants by the entireties. There was a first deed of trust on the residence with the approximate balance of $12,000 and a second deed of trust in favor of First & Merchants National Bank to secure a $50,000 demand note. The $50,000 note was pledged to First & Merchants as collateral for several loans made to Anderson to use in his business, Anderson Electronics, Inc.

The business loans included more than $74,000 not guaranteed by the Small Business Administration and a $150,000 note secured by the Small Business Administration. The SBA had paid the bank about $121,000 on the $150,000 obligation and had taken an assignment of the Bank's right against Anderson on account of that note.

Upon this state of facts, the bankrupt being hopelessly insolvent, the bankruptcy court, upon the application of First & Merchants which wished to foreclose on the second deed of trust, modified the automatic stay provided for under 11 U.S.C. Sec. 362 "to permit the parties to pursue their remedies in the state court." The bankruptcy court also declined to discharge the bankrupt and continued the discharge hearing indefinitely. The question before us is whether or not the bankruptcy court erred by so modifying the automatic stay provision. We affirm.

The case of In re Ford, 3 B.R. 559 (D.Md.1980), which we affirmed on the opinion of the bankruptcy court sub nom Greenblatt v. Ford, 638 F.2d 14 (4th Cir.1981), held in a similar situation that the interest of the bankrupt in real estate held by the entireties was a part of the bankrupt estate under 11 U.S.C. Sec. 541 which interest was subject to exemption under 11 U.S.C. Sec. 522(b)(2)(B), and impliedly held that the automatic stay provision of 11 U.S.C. Sec. 362 applied to the bankrupt's entirety interest in the property. We are of opinion the automatic stay provision of Sec. 362 applies to the exempt entireties interest, and the parties recognize that rule.

We think the reasoning in Ford is persuasive, even if not controlling, here. In Ford we stated:

"Presuming that the debtor elects to exempt his interest in tenants by the entireties property, the Code as construed by this decision in no way affects the rights of a joint creditor of both spouses as those rights existed under the Act. As in the past, a joint creditor may, prior to the discharge of the bankrupt spouse from the debt of each creditor and upon the lifting of the stay, proceed to obtain judgment, execute or foreclose upon property owned by both the bankrupt and the non-bankrupt spouse as tenants by the entireties. Phillips v. Krakower, supra...." 3 B.R. at 576.

We think the fact that the property is held by the entireties and that the secured creditor will otherwise be unable to presently realize on its security for past due debts is quite analogous to the situation which existed in Phillips v. Krakower, 46 F.2d 764 (4th Cir.1931). In that case we affirmed an order of the district court which delayed the discharge of a bankrupt, a joint obligor on a note, so that the holder of the note could obtain a judgment in state court against the bankrupt and his wife who owned real estate held by the entireties. The reason for our decision was that the property otherwise could not have been reached by the creditor and was not subject to the bankruptcy proceeding. Just as importantly, we have only recently followed Krakower in Chippenham Hospital v. Bondurant, 716 F.2d 1057 (4th...