Strauss v. Haines

Filing 11

ORDER AFFIRMING BANKRUPTCY COURT'S MEMORANDUM OPINION AND ORDER OVERRULING TRUSTEES OBJECTION TO EXEMPTION. Signed on 9/1/15 by District Judge Ortrie D. Smith. (Matthes, Renea)

IN THE UNITED STATES DISTRICT COURT FOR THE
WESTERN DISTRICT OF MISSOURI
WESTERN DIVISION
BRUCE E. STRAUSS,
Appellant/Trustee,
vs.
RANDI KATHLEEN HAINES,
Appellee/Debtor.

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Case No. 5:15-CV-6059-ODS

ORDER AFFIRMING BANKRUPTCY COURT’S MEMORANDUM OPINION
AND ORDER OVERRULING TRUSTEE’S OBJECTION TO EXEMPTION
Before the Court is an appeal from the Bankruptcy Court’s Memorandum Opinion
and Order Overruling Trustee’s Objection to Exemptions. Doc. #3-9. For the reasons
below, the Bankruptcy Court’s Order is AFFIRMED.

I. BACKGROUND
The facts relevant to this appeal are undisputed. Debtor Randi Kathleen Haines
filed a Chapter 7 bankruptcy in December 2012. Her original schedules did not include
a brokerage account with an approximate value of $198,383.00. Debtor later amended
her bankruptcy schedules to include the brokerage account, listing the account as held
in tenancy by the entirety (with her spouse) and claiming the brokerage account was
exempt. Doc. #3-2, at 1, 6.
Trustee Bruce Strauss objected to Debtor’s claimed exemption. Doc. #3-3. He
argued that the account application for the brokerage account identified the owners –
Debtor and her spouse – as joint tenants with rights of survivorship, not tenants by the
entirety. Doc. #3-1. Debtor responded to the objection, arguing she and her spouse
are joint owners of property, and in Missouri, it is presumed that the ownership is as
tenants by the entirety, and the checking of a box for “joint tenants” on the application
did not defeat the presumption that the account was held as a tenancy by the entirety.
Doc. #3-4, at 1-2.

On May 21, 2014, the Honorable Cynthia A. Norton held a hearing on Trustee’s
objection to the claimed exemption. Doc. #3-5. Thereafter, the parties briefed the
issue. On April 14, 2015, the Bankruptcy Court entered an order overruling Trustee’s
objection to Debtor’s claimed exemption. Doc. #3-9.
Trustee appeals the Bankruptcy Court’s decision to this Court. Trustee raises
two issues: (1) the Bankruptcy Court erred in finding that the brokerage account is
owned by Debtor and her spouse as tenants by the entirety, and (2) the Bankruptcy
Court erred in considering parol evidence and by finding that Trustee did not have
standing to object to the inclusion of parol evidence.

II. STANDARD OF REVIEW
“When a bankruptcy court’s judgment is appealed to the district court, the district
court acts as an appellate court and reviews the bankruptcy court’s legal determinations
de novo and findings of fact for clear error.” In re Falcon Products, Inc., 497 F.3d 838,
840-41 (8th Cir. 2007) (citations omitted).

III. DISCUSSION
A.
Section 522(b)(3)(B) of the Bankruptcy Code exempts property held with a nondebtor spouse as tenants by the entirety. 11 U.S.C. § 522(b)(3)(B); see also In re
Bellingroehr, 403 B.R. 818, 820 (Bankr. W.D. Mo. 2009). Tenants by the entirety is a
form of marital property ownership created by common law, and the Missouri legislature
has codified a presumption that spouses own certain types of property in that form. See
e.g., Mo. Rev. Stat. § 362.470 (joint bank account).1 Any conveyance of property to a
husband and wife is presumed to create a tenancy by the entirety. See e.g., Nelson v.
Hotchkiss, 601 S.W.2d 14, 17-19 (Mo. banc 1980); Capital Bank v. Barnes, 277 S.W.3d
781, 782 (Mo. Ct. App. 2009) (citation omitted); In re Stanke, 234 B.R. 439, 441 (Bankr.
W.D. Mo. 1999) (citations omitted).

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The parties do not cite any Missouri statute pertaining to the property interest to
be applied to brokerage accounts. Both the Bankruptcy Court and this Court have been
unable to locate such a statute. Thus, as both parties argue and the Bankruptcy Court
found, Missouri common law applies.
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The Missouri Supreme Court held that “[t]he presumption that a conveyance to
husband and wife creates an estate by the entirety may be overcome only by a clear
and express declaration.” Nelson, 601 S.W.2d at 20; see also Capital Bank, 277
S.W.3d at 782 (citation omitted) (finding he presumption of tenancy by the entirety can
be rebutted “if the weight of the evidence leaves the trial judge with no doubt that the
property was not held as a tenancy by the entirety.”). The question facing the
Bankruptcy Court (and now, this Court) was whether checking a box next to “Joint
Tenants with Right of Survivorship” on a brokerage account application overcomes the
presumption of creating a tenancy by the entirety.
While no Missouri case is precisely on point, several Missouri cases provide
guidance. In Nelson, the Missouri Supreme Court considered whether a deed stating
the property was granted as “joint tenants with right of survivorship… and not as tenants
in common” rebutted the common law presumption of a tenancy by the entirety. 601
S.W.2d at 19. The Court found that where the only evidence of the parties’ intention of
ownership was “the words on the face of the deed,” the parties must use a limiting
phrase – such as, “and not as tenants by the entirety” – to negate the presumption that
the property is conveyed as tenants by the entirety. Id. at 20. Because the deed did not
include a limiting phrase, the Supreme Court found that the property was held as a
tenancy by the entirety. Id.
Similarly, in Scott v. Flynn, the Missouri Court of Appeals considered whether a
money market account owned by a married couple was held as a tenancy in the entirety
when the money market account card included the pre-printed designation of “Joint
Tenants with Right of Survivorship.” 946 S.W.2d 248, 250 (Mo. Ct. App. 1997). The
Court of Appeals found that “absent a specific disclaimer that the account is not being
held as tenants by the entirety, an account card signed by a husband and wife as joint
tenants with right of survivorship must be considered a tenancy by the entirety.” Id. at
251-52. Because the money market account card did not include a specific disclaimer,
the Court found that the money market account was held as a tenancy by the entirety.
Id. at 251; see also Brown v. Mercantile Bank of Poplar Bluff, 820 S.W.2d 327, 333-36
(Mo. Ct. App. 1991) (finding that a husband and wife’s certificate of deposit was held as
a tenancy by the entirety even though the face of certificate of deposit expressed that
the owners were “joint tenants with right of survivorship (and not as tenants in
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common)”). Trustee has not cited a single Missouri case that is analogous to the facts
presented in this appeal.
Here, the application for the brokerage account identified the owners as joint
tenants with rights of survivorship, not tenants by the entirety. Doc. #3-1. The
application, however, did not use a limiting phrase or include a disclaimer expressly
stating that the brokerage account was not held as tenants by the entirety. Applying
Missouri law, the Bankruptcy Court properly found that the brokerage account was held
as a tenancy by the entirety, and therefore, was exempt. The Bankruptcy Court’s
decision is affirmed.

B.
Trustee also sets forth two arguments regarding parol evidence. First, Trustee
contends the Bankruptcy Court erred in allowing parol evidence to interpret the account
application. This argument is without merit because the Bankruptcy Court specifically
stated only the account application was considered. (Doc. #3-9, at 14.)
Trustee’s other argument – to wit, that the Bankruptcy Court erred in finding
Trustee did not have standing to object to the inclusion of parol evidence – is also
without merit. As set forth above, the Bankruptcy Court did not consider parol evidence
in rendering its decision, rendering this argument moot. Second, even if the Court were
to look beyond the fact that the Bankruptcy Court did not consider parol evidence in
rendering its decision, Trustee failed to establish that he meets the legal and factual
requirements to invoke the parol evidence rule. See Doc. #3-9, at 14. Thus, the
Bankruptcy Court’s decision is affirmed.

IV. CONCLUSION
The Order of the Bankruptcy Court (Doc. #3-9) is AFFIRMED.
IT IS SO ORDERED.
/s/ Ortrie D. Smith
ORTRIE D. SMITH, SENIOR JUDGE
UNITED STATES DISTRICT COURT

DATE: September 1, 2015

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