498 B.R. 348
S.D. Fla.2013Background
- Denise Roberts-Dude (debtor) owned residential property encumbered by first and second mortgages held by Wells Fargo and a third mortgage held by JP Morgan Chase (~$519,000).
- Debtor filed a Chapter 11 motion under 11 U.S.C. §§ 506(a) and 506(d) to value and bifurcate liens and to strip off Chase’s wholly unsecured third lien, alleging property value ~$860,000.
- Title history shows multiple quitclaim deeds (2004–2011) conveying varying undivided percentages; a 2011 deed purported to convey 98% to Roberts-Dude and 2% to "Harald Dude and Denise Dude, husband and wife."
- Debtor and her husband submitted affidavits asserting they did not hold any tenancy by the entirety interest and that the 2011 deed reflected their intent not to create survivorship tenancy.
- Bankruptcy Court found the 2% interest was titled to the couple as "husband and wife," creating a tenancy by the entirety under Florida law; because the husband was not a debtor, the court denied the strip-off motion.
- Debtor converted case to Chapter 7; the district court held the appeal was not moot (Eleventh Circuit precedent permits strip-off of wholly unsecured liens in Chapter 7) and affirmed the Bankruptcy Court.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether any portion of the Property is held by the entirety | Deeds and affidavits show intent to avoid tenancy by the entirety; no part held as tenancy by the entirety | Final deed’s language (2% to “husband and wife”) presumptively creates tenancy by the entirety under Florida law | Held: 2% interest is a tenancy by the entirety (tenancy created by deed language); affidavits irrelevant absent fraud |
| Whether extrinsic evidence (affidavits) can rebut the presumption of tenancy by entirety | Affidavits prove parties’ intent and should control title effect | Florida law bars extrinsic evidence to rebut presumption except for fraud; title instruments control | Held: Extrinsic intent evidence inadmissible to defeat the presumption; no fraud alleged |
| Whether a tenancy by the entirety can be a partial (less-than-100%) undivided interest | Partial interests cannot satisfy unities required for entirety | Florida precedent allows husband and wife to hold an undivided fractional share as tenancy by the entirety | Held: Partial (2%) entirety interest is valid; fractional tenancies by entirety recognized |
| Whether the appeal is moot after conversion to Chapter 7 | Conversion moots because strip-off relief unavailable in Chapter 7 (citing Dewsnup) | Eleventh Circuit precedent (Folendore; In re McNeal) allows strip-off of wholly unsecured liens in Chapter 7; thus appeal remains live | Held: Appeal not moot; Eleventh Circuit precedent permits consideration of strip-off in Chapter 7 for wholly unsecured liens |
Key Cases Cited
- Dewsnup v. Timm, 502 U.S. 410 (holding strip-down of partially secured lien not available in Chapter 7)
- Folendore v. United States Small Business Admin., 862 F.2d 1537 (11th Cir.) (holding strip-off of wholly unsecured lien available in Chapter 7)
- Beal Bank SSB v. Almand & Assocs., 780 So.2d 45 (Fla. 2001) (presumption that conveyance to spouses creates tenancy by the entirety absent contrary deed language)
- Butner v. United States, 440 U.S. 48 (property rights in bankruptcy determined by state law)
- Bridgeview Bank Group v. Callaghan, 84 So.3d 1154 (Fla. 4th DCA 2012) (presumption of entirety title is not rebuttable except by fraud)
- Winchester v. Wells, 265 F.2d 405 (explaining spouses take an undivided share and are tenants by the entirety as to their share)
- Sinnreich (In re Sinnreich), 391 F.3d 1295 (11th Cir. 2004) (applies state law to determine debtor’s property interests)