2011 VT 86


RBS Citizens, N.A. f/k/a/
Citizens Bank of Rhode Island v. Ouhrabka (2010-415)
 
2011 VT 86
 
[Filed 05-Aug-2011]
 
NOTICE:  This opinion is
subject to motions for reargument under V.R.A.P. 40 as well as formal revision
before publication in the Vermont Reports.  Readers are requested to
notify the Reporter of Decisions, Vermont Supreme Court, 109
State Street, Montpelier, Vermont 05609-0801 of any errors in order that
corrections may be made before this opinion goes to press.
 
 

2011 VT 86

 

No. 2010-415

 

RBS Citizens, N.A. f/k/a
  Citizens Bank of Rhode Island


Supreme Court


 


 


 


On Appeal from


     v.


Superior Court, Caledonia Unit,


 


Civil Division


 


 


Jan M. Ouhrabka


May Term, 2011


 


 


 


 


Alan
  W. Cook, J. (Ret.), Specially Assigned


 

Andre D. Bouffard and Bruce C.
Palmer of Downs Rachlin Martin PLLC, Burlington, for
  Plaintiff-Appellant.
 
Jared H. Cloutier of The Law Office of William P. Neylon,
St. Johnsbury, for
  Defendant-Appellee.
 
 
PRESENT:  Reiber, C.J.,
Dooley, Johnson, Skoglund and Burgess, JJ.
 
 
¶
1.            
REIBER, C.J.   This is an interlocutory appeal from the
trial court’s denial of appellant RBS’s motion for a writ of attachment of appellee Jan Ouhrabka’s property,
which Ouhrabka owns jointly
with his wife as tenants by entirety.  The trial court held that a
creditor, like RBS, cannot attach property owned jointly by a debtor and a nondebtor when they hold that property as tenants by
entirety.  RBS contends that the estate of tenancy by entirety is an
anachronism whose continuing utility should be reconsidered.  In the
alternative, RBS argues that Vermont law does not explicitly preclude granting
a creditor prejudgment attachment where the property is held jointly by the
debtor and a nondebtor in a tenancy by
entirety.  We disagree and affirm.
¶
2.            
The facts in the matter before us are uncontested.  Ouhrabka is the sole owner of Providence Chain Co., a Rhode
Island jewelry corporation with a principal place of business located in
Providence, Rhode Island.  On June 7, 2010, the Rhode Island superior
court placed Providence Chain into receivership.  As of that date,
Providence Chain’s outstanding indebtedness to RBS exceeded $15,000,000.  
¶
3.            
By execution of a personal guaranty, signed on August 31, 2006, Ouhrabka became personally liable up to $500,000 for loans
to Providence Chain.  Ouhrabka signed an
amendment to this guaranty on March 18, 2009 which made his personal liability
for debts of Providence Chain unlimited.  As part of the loan process, Ouhrabka submitted a personal financial statement which
listed the Vermont property in East Ryegate as a
joint asset with a stated value of $250,000. 
¶
4.            
At the time Providence Chain was placed into receivership and financial
records demonstrated that liquidating the company could satisfy approximately
$3,000,000 of the debt owed to RBS.  RBS filed the underlying complaint,
seeking to recover amounts owed by the Ouhrabka to
RBS pursuant to his individual unlimited guaranty with an estimated balance of
$10,000,000.  In conjunction with its complaint, RBS filed a motion
pursuant to Vermont Rule of Civil Procedure 4.1(g) requesting the trial court
place a prejudgment writ of attachment against Ouhrabka’s
real estate holdings, including the Vermont property.  The court denied
the writ,[1]
holding that under Vermont common law, a creditor of a single debtor can not attach property owned jointly by a debtor and a nondebtor when held as tenants by entirety.   RBS
moved for permission to appeal to this Court and to stay the effectiveness of
the order denying attachment.[2]
 The court granted these motions, and we accepted the matter as an
interlocutory appeal.
¶
5.            
RBS contends that because the original purpose of the estate of tenancy
by entirety was to protect the survivorship rights of married women at a time when
those were the only property rights which could be held by married women, such
an estate is an anachronism with no place in our modern jurisprudence.  In
making this argument RBS points to women’s historical coverture
disabilities and the changes wrought by subsequent statutes.  “At common
law, the legal existence of a wife was suspended during the marriage . . . [u]pon marriage, a husband acquired
vested interests in his wife’s property.”  R. &
E. Builders, Inc. v. Chandler, 144 Vt. 302, 304, 476 A.2d 540, 541 (1984).
 Thus the “husband ha[d] the right of possession and control of property
so owned by himself and wife, for their joint lives, and he [could] convey,
lease, or [e]ncumber it by mortgage for the same
period.”  Laird v. Perry, 74 Vt. 454, 460, 52 A. 1040, 1041 (1902),
abrogated on other grounds by Estate of Girard v. Laird, 159 Vt.
508, 513, 621 A.2d 1265, 1268 (1993).  These “rights and powers of
alienation in the husband, and of attachment and levy of execution in his
creditors, [we]re limited only by the wife’s
contingent right to the property or income by survivorship.”  Id.
at 461, 52 A. at 1041.  
¶
6.            
“Starting in the late nineteenth century, Vermont, like other states,
began to enact statutes, such as the Rights of Married Women Act, see 15 V.S.A.
§§ 61-69, to grant married women property and contractual rights independent of
their husbands.”  Baker v. State, 170 Vt. 194, 257, 744 A.2d 864,
908-09 (1999) (Johnson, J., concurring in part and dissenting in part) (citing Med.
Ctr. Hosp. v. Lorrain, 165 Vt. 12, 14, 675 A.2d 1326, 1328 (1996)).
 “The Legislature’s intent in enacting the Rights of Married Women Act was
to reject the archaic principle that husband and wife are
one person, and to set a married woman free from the thralldom of the common
law.” Id. at 257, 744 A.2d at 909 (quotations
omitted).  After enactment of these statutes, the legal existence
of married women was no longer merged into that of their husbands.  Med.
Ctr. Hosp., 165 Vt. at 15, 675 A.2d at 1329; see Sargent
v. Platt, 111 Vt. 185, 188, 13 A.2d 195, 197 (1940) (“It is now certain
that a married woman has a separate estate in property conveyed to herself and
husband as tenants by entirety since the enactment of [a portion of the Rights
of Married Women Act, see 15 V.S.A § 64], as it gives her the management and
control of her interest therein.”).
¶
7.            
RBS argues that as a result of these fundamental changes, the legal
fiction of husband and wife as one person is fundamentally at odds with their
equal rights of property ownership and thus should be abolished.  RBS
acknowledges that in our post-Act decisions, this Court has not treated the
tenancy by entirety as having been abolished.  See,
e.g., Sargent, 111 Vt. at 188, 13 A.2d at 197.
 Nevertheless, RBS argues that the theoretical basis for this estate
remains irreconcilable with the statutory command that a married woman is a
separate legal person that can own, mortgage, convey, and control real property
independent of her husband.  We disagree.
¶
8.            
RBS seems to contend that the estate of tenancy by entirety was based in
married women’s inability to control and manage marital property at common law
and that once the disabilities of coverture were removed, the entire “theoretical basis” for the estate was
abrogated.  But the estate never flowed from the married woman’s common
law disabilities, rather, it “result[ed] from the
common-law principle of marital unity.”  Lang v. Comm’r
of Internal Revenue, 289 U.S. 109, 111 (1933) (“The tenancy . . . is said
to be sui generis.  Upon the death of one of the tenants the survivor does
not take as a new acquisition, but under the original limitation, his estate
being simply freed from participation by the other.”).  RBS mistakenly equates
the concept of marital unity with the subsumption of
a married woman’s legal existence into that of her husband at common law. 
Historically, marital unity has always been distinct from the antiquated
concepts of a wife’s coverture disabilities and a
husband’s common law right to possession and management of marital property.
 See, e.g., Laird, 74 Vt. at 461, 52 A. at 1041
(“But the husband has an interest which does not flow from the unity of the
estate, and in which the wife has no concern.  He is entitled to the
use and possession of the property during the joint lives of himself and
wife.”).  The unity of estate is the defining characteristic of a tenancy
by entirety and results from the manner in which the parties take title.
 In an early case delineating the difference between joint tenants and
tenants by entirety, this Court explained: “in [the] case of joint tenants each
[party] has a seizin of the whole but a title only to
his aliquot part.”  Park v. Pratt, 38 Vt. 545,
550 (1866).  A tenancy by entirety “differs from a joint tenancy in
the entirety of title as well as seizin of each
grantee in the whole estate; they have but one title and each owns the
whole.”  Id.  Thus the “theoretical basis” of tenancy by
entirety was and is premised on the manner in which the spouses take title—in
its entirety—and the manner in which the parties are seized—of the whole. 
It is not, as RBS contends, based in the concept of a married woman’s inability
to freely own property at common law.  While the Rights of Married Women Act
vested married women with equal rights to manage marital property, it did
nothing, explicitly or implicitly, to alter the quality of the marital unity,
seizing, or title. 
¶
9.            
The Hawaii Supreme Court came to a similar conclusion in addressing the
question of the effect of an analogous statute on the estate of tenancy by
entirety:
 
The effect of the Married Women’s Property Acts was to abrogate the husband’s
common law dominance over the marital estate and to place the wife on a level
of equality with him as regards the exercise of ownership over the whole
estate. The tenancy was and still is predicated upon the legal unity of husband
and wife, but the Acts converted it into a unity of equals and not of unequals as at common law. No longer could the husband
convey, lease, mortgage or otherwise encumber the property without her consent.
The Acts confirmed her right to the use and enjoyment of the whole estate, and
all the privileges that ownership of property confers, including the right to convey
the property in its entirety, jointly with her husband, during the marriage
relation.
 
Sawada v. Endo, 561 P.2d 1291, 1295 (Haw. 1977) (citations
omitted).  We conclude the theoretical basis of tenancy by
entireties remains intact and that the estate enjoys continued validity in
Vermont.[3]

¶
10.        
RBS contends that even if the Rights of Married Women Act did not
abrogate the estate of tenancy by entirety, nothing in Vermont law constrains
this Court from holding that the creditor of a debtor spouse can attach
tenancy-by-entirety property owned jointly by the debtor and a nondebtor spouse.  It is true that no Vermont statute
explicitly precludes such an outcome.  See generally 12 V.S.A. §§
3251-3410.  However, Civil Rule 4.1(a), which governs attachment, explains
that: “[i]n any action under these rules (except an
action for malicious prosecution, libel, or slander), real estate, goods and
chattels, and other property may, in the manner and to the extent provided
by law and by this rule, be attached and held to satisfy any judgment for
damages and costs which the RBS may recover.”  V.R.C.P. 4.1(a) (emphasis
added).  The phrase “to the extent provided by law” implicitly limits the
availability of attachment to the scope defined by laws external to the
rule—including our common law.
¶
11.        
This Court has long held that “[t]he estate of
the wife and the husband’s interest in her tenancy by the entirety, if validly
created, is protected from the husband’s sole creditors.”  Rose v.
Morrell, 128 Vt. 110, 112, 259 A.2d 8, 10 (1969); see also Bellows Falls
Trust Co. v. Gibbs, 148 Vt. 633, 633, 534 A.2d 210, 211 (1987) (mem.) (holding that “[n]either spouse has a share [of
tenancy by entirety property] which can be disposed of or encumbered without
the joinder of the other spouse”); Lowell v.
Lowell, 138 Vt. 514, 515-16, 419 A.2d 321, 322 (1980) (holding that
property held by husband and wife in tenancy by entirety cannot be reached by
husband’s creditors absent fraud); Town of Corinth v. Emery, 63 Vt. 505,
508, 22 A. 618, 619 (1891) (holding that property held by husband and wife in
tenancy by entirety is exempt from attachment or execution for the sole debts
of husband).  RBS admits that when property is held in tenancy by entirety
neither spouse may convey their interest voluntarily, without the consent of
the other.  However, RBS draws a distinction between voluntary conveyances
and involuntary attachments.  RBS argues, that while it is beyond dispute
that no voluntary conveyance of an interest in entireties property may be made
without joinder of both owners, see
27 V.S.A. § 349(a)(3), this Court’s decisions concerning
involuntary attachment cannot be read to preclude pre-judgment attachment of a
debtor spouse’s separate interests for that spouse’s sole debt.
¶
12.        
Our past decisions do not distinguish voluntary conveyances of tenancy
by entirety property from involuntary attachments.  See, e.g., Corey v.
McLean, 100 Vt. 90, 91, 135 A. 10, 11 (1926) (holding that marital property
“was not attachable for the [sole] debts of the husband” because it was held in
tenancy by entirety).  Furthermore, despite RBS’s contention that numerous
decisions from other jurisdictions support its proposition that tenancy by
entirety property may be attached, most jurisdictions recognizing the estate do
not allow a creditor of a single debtor to attach property held jointly by the
debtor and the nondebtor in a tenancy by
entirety.  See Brown, supra, § 6:84 (“Most jurisdictions that
recognize tenancies by the entirety hold that a creditor of one spouse cannot
reach the debtor spouse’s share in the property.”); see also Steigler v. Ins. Co. of N.A., 384 A.2d 398,
400 (Del. 1978) (“[H]usband and wife are seized, not
merely of equal interests, but of the whole estate during their lives and the
interest of neither of them can be sold, attached, or liened
except by the joint act of both husband and wife.”); Beal Bank, SSB v. Almand & Assocs., 780 So.2d 45, 53 (Fla. 2001)
(explaining elements of tenancy by entirety); Keen v. Keen, 60 A.2d 200,
204 (Md. 1948) (noting property held as tenancy by entirety could not be
“levied upon or attached for the debts of either the husband or the wife.”).
¶
13.        
RBS advances the policy argument that distinguishing between voluntary
conveyance and involuntary attachment is of great importance because to
prohibit involuntary attachment of tenancy by entirety properties would allow
assets to be unfairly shielded from one spouse’s creditors.  This argument
is unpersuasive.  If a spouse transfers property into a tenancy by
entirety to evade his creditors, the creditor is not without remedy: it can
pursue an action for fraud.  See 12 V.S.A. § 2808 (providing for action in
superior court when property “is held in fraud of the levying creditor’s
rights”).  Of course, if the asset was held in a tenancy by entirety
before the issuance of the debt, an action for fraud would not lie—but neither
could the creditor argue the asset was unfairly shielded from attachment. 
At the time of contracting, a creditor may always require both tenants by
entirety to assume liability for a debt, it may also
decline to issue credit absent sufficient security.  RBS here is a
sophisticated lender and was aware that Ouhrabka’s property
was held in tenancy by entirety.  RBS could have required Ouhrabka’s spouse to cosign the loan and unlimited
guaranty.  It failed to do so.  This court will not now correct RBS’s
error through wholesale revision of Vermont entireties law.
Affirmed.
 

 


 


FOR THE COURT:


 


 


 


 


 


 


 


 


 


 


 


Chief
  Justice

 





[1] 
The trial court had initially granted the writ of attachment on an interim
basis. 


[2] 
By stipulation of the parties, the writ of attachment that had initially been
granted on an interim basis and thereafter recorded, remains
in effect.


[3] 
Our holding today is by no means unique.  While some jurisdictions treat
tenancy by entirety as having been abolished by enactment of statutes similar
to Vermont’s Rights of Married Women Act, the majority of those that recognized
the estate at common law continue to do so.  See O. Phipps, Tenancy by
Entireties, 25 Temp. L.Q. 24, 29 (1951); 1 W.H. Brown,
The Law of Creditor’s and Debtors § 684, n. 3 (June 2011).



