August 20, 2019

Joint Tenancy Does Not Protect Against Collection; Flatrock River Lodge v. Stout

Category: Indianapolis Law Club | Author: | Share:

You can obtain the biggest judgment in the world, but it won’t matter if it is against someone who is destitute. So collections can be an important part of any litigation practice. The question presented in this case is whether ownership of property in joint tenancy with a right of survivorship can protect real estate against collections. The Court of Appeals held that it cannot.

In 1985, Morris and Tonia Stout were deeded real estate as joint tenants with right of survivorship. In 2016, Flatrock filed a complaint against Morris seeking judgment on an unpaid balance. Flatrock also filed a lis pendens with respect to the real estate. Flatrock and Morris eventually entered into an agreed judgment.

Flatrock began proceedings supplemental. Tonia (who had intervened) argued that Flatrock could not execute against the real estate because it was titled as joint tenants with right of survivorship. The trial court agreed with Tonia, and Flatrock appealed. Morris died while the appeal was pending.

On appeal, Tonia argued that the case was moot because of Morris’s death. Tonia argued that as the property was held as a joint tenancy with right of survivorship, the property became wholly hers after Morris’s death, free from any judgment lien. But this is not how things work. Because the judgment became a lien against Morris’s interest in the property during his life, Tonia only could take Morris’s interest subject to Flatrock’s lien.

And Tonia’s substantive argument fared no better. Tonia analogized a joint tenancy with right of survivorship to a tenancy by the entireties. But the Court disagreed. While a joint tenancy and a tenancy by the entireties are similar, they differ in an important respect: a tenancy by the entireties is owned by spouses and is premised on the legal fiction that husband and wife are a single entity, while a joint tenancy is merely ownership by more than one person. And Tonia mistakenly conflated the two in her argument. Also, a party who owns a joint tenancy may sell or mortgage his interest to a third party. However, an entireties estate cannot be severed by the unilateral action of one tenant.

Tonia asserts broadly and without qualification that “the law is clear that jointly held property is exempt from execution.” Thus, she asks that we apply subsection 2(c)(5) of the exemption statute, which refers only to an interest held as a tenant by the entireties, to the interest she and Morris held “as joint tenants with the right of survivorship.” In so doing, she equates the two tenancies. Tonia reasons that “[to] allow Flatrock to force a sale of the real estate would violate and frustrate the intent” of her grandparents. But it is not the subjective intent of the grantors which controls the operation and effect of the instrument of conveyance. The phrase “joint tenants with the right of survivorship,” which appears in the deed from Tonia’s grandparents, is a term of art with a distinct meaning in the common law which has not been altered by statute.

The statutory exemption only refers to tenancy by the entireties, so it only applies to tenancy by the entireties. Flatrock should have been able to collect against Morris’s share of the property.

Lessons:

  1. The death of a judgment debtor does not extinguish a judgment lien against property held jointly with a right of survivorship.
  2. If a statute applies only to property held as a tenancy by the entirety, then it does not apply to property held jointly with a right of survivorship.
  3. Property held as a joint tenancy with right of survivorship is subject to collections.