HOWARD C. NEWMAN, PLAINTIFF-RESPONDENT, v. ARTHUR D. CHASE AND DOROTHY A. CHASE, DEFENDANTS-APPELLANTS.
Supreme Court of New Jersey
Argued November 3, 1975 — Decided May 18, 1976
70 N.J. 254
Mr. Russell H. Hulsizer argued the cause for plaintiff-respondent.
The opinion of the Court was delivered by
MOUNTAIN, J. Plaintiff, Howard C. Newman, purchased from the trustee in bankruptcy of defendant, Arthur D.
The facts of the case are not in dispute. Defendants, Arthur and Dorothy Chase, took title as tenants by the entirety to a one-family house in Toms River, in November 1971, having obtained a mortgage for the full purchase price of $25,990 from the Lincoln Savings Bank. With their
The history of the law relating to tenancies by the entirety in New Jersey need not be retraced here. It is discussed at length in this Court‘s opinion in King v. Greene, supra, 30 N.J. 395 (1959) and in Justice Hall‘s dissenting opinion in that case. 30 N.J. at 415. Since the adoption of the Married Women‘s Act of 1852, the rights of each spouse in property owned by thеm as tenants by the entirety have been the same. After the passage of that legislation, “[t]here was no longer any distinction between the spouses. Each could do what the other could.” King v. Greene, supra, at 418 (Hall, J., dissenting). Each tenant by the entirety is a tenant in common with the other during the joint lives of the spouses. Upon the death of a spouse, the survivor is then the sole owner.3
It is conceded that there may be no partition with respect to lands held by spouses as tenants by the entirety.
In Bilder v. Robinson, 73 N.J. Eq. 169 (Ch. 1907) suit was brought by a purchaser at execution sale of all the right, title and interest of a debtor-husband, in and to property held by him and his wife as tenants by the entirety. The bill of complaint sought the appointment of a receiver to collect rents and pay to comрlainant his proper share. The receiver was appointed. In the course of his opinion Vice Chancellor Stevenson indicated that had partition been sought, he might have been disposed to grant relief in that form. No authorities were cited to support this dictum. However, in Schulz v. Ziegler, supra, 80 N.J. Eq. 199 (E. & A. 1912) the Court of Errors and Appeals squarely held that partition may be had by the transferee of the interest of one spouse as against the other spouse. In Schulz, a father had conveyed to his daughter his interest in property which he held with his wife as tenants by the entirety; the daughter then sought, and was granted, partition of the possessory estate as between herself and her mother.
In Riccio v. Riccio, 101 A. 426 (Ch. 1917), our former Court of Chancery, giving a very broad interpretation to the holding in Schulz, concluded that the reasoning of that case applied to the situation in which one spouse sought partition as against the other spouse of the possessory interest during coverture. This decision was overruled in
The Appellate Division, in Silver Bay Homes v. Herrmann, supra, 128 N.J. Super. 114 (1974) was presented with substantially the same factual situation which exists here. Feeling itself bound by Schulz it determined, albeit reluctantly, that the purchaser of the husband‘s interest from his trustee in bankruptcy might have partition of the possessory interest for the joint lives of the spouses.
Certification was not sought in that case. The instant suit, however, presents an almost identical fact situatiоn and affords us an opportunity to rule on the issue. We now decide that although a debtor‘s interest in property held as tenant by the entirety may be reached by his or her creditors, the remedy of partition is not automatically available to a purchaser at execution sale or to a grantee of a trustee in bankruptcy such as the plaintiff in this action.
As we have already indicated, there are a number of cases in New Jersey holding — or at least stating — that a tenant in common has an absolute right to partition. See, for
But partition is also an ancient head of equity jurisdiction, an inherent power of the court independent of statutory grant. 4 Pomeroy, Equity Jurisprudence §§ 1387-90 (5th ed. 1941); 68 C. J. S. Partition § 62b at 95-96; Martin v. Martin, 106 N.J. Eq. 258, 260 (Ch. 1930); Grassman v. Badgley, 90 N.J. Eq. 203, 206 (Ch. 1919). Cf. Freeth v. Rule, 118 N.J. Eq. 285, 286 (E. & A. 1935). In the exercise of this power our courts of equity have not hesitated to exercise discretion as to the particular manner in which partition is effected between the parties.
It is an established principle that a court of equity, in decreeing partition, does not act ministerially and in obedience to the call of those who have a right to the partition, but founds itself on its general jurisdiction as a court of equity, and administers its relief ex aequo et bono, according to its own notions of general justice and equity between the parties. [Woolston v. Pullen, 88 N.J. Eq. 35, 40 (Ch. 1917)]
See also Hotchkin v. Hotchkin, 105 N.J. Super. 475 (Ch. Div. 1969) (partition of personal property); Lipin v. Ziff, 53 N.J. Super. 443 (Ch. Div. 1959); Barrell v. Barrell, 25 N.J. Eq. 173 (Ch. 1874); Hall v. Piddock, 21 N.J. Eq. 311 (Ch. 1871).
No case in this state has hitherto gone so far as to deny absolutely the right of partition to a petitioning cotenant, at least in the absence of a prior agreement not to partition. Yglesias v. Dewey, 60 N.J. Eq. 62 (Ch. 1900); cf.
[A] court of equity is vested with sufficient discretion in awarding or denying relief [by way of partition] to prevent the remedy from becoming an instrument of fraud or oppression. [Shell Oil Co. v. Seeligson, 231 F. 2d 14, 17 (10th Cir. 1955)]
See also Sadler v. Public Nat. Bank & Trust Co., 172 F. 2d 870, 876 (10th Cir. 1949); Holland v. Shaffer, 162 Kan. 474, 178 P. 2d 235, 173 ALR 845 (1947).
In the case of partition sought by a transferee of the interest of one spouse in the family home, considerations of policy persuade us that a court should be permitted to exercise its equitable discretion in deciding whether or not to allow the remedy. While the original reason for the peculiar characteristics оf a tenancy by the entirety was no doubt the common-law concept of the unity of husband and wife, 2 American Law of Property, supra, § 6.6, the fact that the Legislature has preserved these characteristics6
[A] protection of the parties to a marriage as security to both spouses during coverture of marital assets that were the work products of their marital economic life and the additional security to the surviving spouse upon the terminаtion of their union by death of the other.
See also Ten Eyck v. Walsh, supra, 139 N.J. Eq. 533, 540 (Prerog. Ct. 1947).
In effect, the special treatment of tenancies by the entirety in New Jersey serves the purposes which are achieved in many states by statutory or constitutional homestead laws.7 See Haskins, Homestead Exemptions, 63 Harv. L. Rev. 1289 (1950). Just as the homestead exemptions effect a balance between two competing social policies — on the one hand, that a debtor‘s assets should be available to his creditors; on the other, that the family of a debtor should not become a charge upon the state — so can an equitable treatment of the rights of a purchaser of one spouse‘s interest in a tenancy by the entirety serve to achieve a similar balance.
The life interest in residential real property for the joint lives of two spouses is a speculative asset, likely to bring only a low price and hence to be of little avail to a creditor seeking satisfaction of a spouse‘s debt. This consideration alone might not operate to deny to a purchasеr
We do not go so far as to hold that a purchaser at an execution sale or from a receiver or trustee in bankruptcy may never be entitled to partition. There is no limit to the value of real prоperty which can be held by husband and wife as tenants by the entirety. Were partition to be automatically denied, there might well be situations in which a debtor would thus be afforded “opportunity to sequester substantial assets from just liabilities.” Way v. Root, 174 Mich. 418, 140 N. W. 577, 579 (1913). But where, as in the present case, a bankrupt husband lives with his young family in a modest home, we hold that it is within the equitable discretion of the court to deny partition to a purchaser of the husband‘s interest, leaving the creditor to resort to some other remedy.
Nevertheless, despite the equities in favor of defendants, plaintiff has, after all, legitimately succeeded to Mr. Chase‘s interest in the property. While in this case we hold that policy considerations preclude partition either in kind or by sale, plaintiff is nonetheless entitled to the alternative equitable remedy of an accounting from his cotenant, Mrs. Chase. Lohmann v. Lohmann, 50 N.J. Super. 37 (App. Div. 1958); Nobile v. Barletta, 109 N.J. Eq. 119 (E. & A. 1931); Neubeck v. Neubeck, 94 N.J. Eq. 167 (E. & A. 1922); O‘Connell v. O‘Connell, 93 N.J. Eq. 603 (E. & A. 1922); Bilder v. Robinson, supra, 73 N.J. Eq. 169 (Ch. 1907).
The cited cases involve for the most part commercial properties with respect to which rents paid by third parties were collected by the cotenant in possession. It is settled law in New Jersey that in such circumstances the cotenants out of possession are entitled to an accounting
This conclusion does not end the calculation, however, for the property is encumbered by a mortgage the principal amount of which was $24,150.98 on January 1, 1973. Mrs. Chase asserts that since then she has been making mortgage, tax, and insurance payments and undertaking necessary repairs to the house. Absent ouster, a cotenant in possession is entitled to contribution from cotenants out of possession for payments made to preserve the common property; see the discussiоn of the development of this doctrine by Judge Conford in Baird v. Moore, supra, 50 N.J. Super. at 165-66. When, as here, there has been an ouster but the ousted cotenant receives an accounting based on the value of the use and occupation by the cotenant in possession, equity requires that appropriate pay-
Plaintiff in his prayer for partition included a demand for one-half the rental value of the premises dating from January 5, 1973, when defendants first occupied the property. To this he is entitled. This sum, subject to an offset, pro rata, for appropriate payments made by Mrs. Chase, will be included in the final judgment.
The judgment of the trial court is reversed and the cause is remanded to it for further proceedings not inconsistent with this opinion.
SULLIVAN, J. (concurring and dissenting). In Mueller v. Mueller, 95 N.J. Super. 244, 248 (App. Div. 1967), I noted that the estate of tenancy by the entirety “spawns numerous title problems and disputes.” This is but another example. I agree that plaintiff is not entitled to partition. However, although I recognize that it follows established case law, I disagree with that part of the majority decision which holds that plaintiff has a present possessory interest in the homestead property as a tenant in common with the other spouse during the coverture and is entitled to an accounting of that spouse‘s possession.
We are here concerned with the family homestead owned by the husband and wife as tenants by the entirety. Each, and both as an entity, own the entire interest. Each, and both, are entitled to the entire possession. While the husband and wife are considered tenants in common during their joint lives, this is solely by virtue of their being married to each other.
A purchaser at a bankruptcy sale, even though the interest of the debtor spouse is purchased, cannot step into that spouse‘s shoes as a tenant in common with the other spouse. That smacks of the bankruptcy sale reaching into the marital union itself.
I would hold that the bankruptcy sale purchaser of a debtor-spouse‘s interest in the marital homestead owned by
Should the debtor-spouse survive the other spouse, the purchaser would then become the owner of the property. If the marriage is terminated by divorce, the purchaser would then own an undivided one-half interest in the property as a tenant in common. He is entitled to no more.
PASHMAN, J. (concurring in part and dissenting in part). I conсur in the result reached by the majority with respect to plaintiff‘s request for partition of the Chase family home. I must dissent, however, from that part of the majority opinion which provides plaintiff with a right to an accounting as a tenant in common in this property during the joint lives of Mr. and Mrs. Chase.
The right to an accounting, like the action for partition, is essentially an equitable remedy. Lohmann v. Lohmann, 50 N.J. Super. 37 (App. Div. 1958); Meisler v. Meisler, 4 N.J. Super. 579 (App. Div. 1949); Neubeck v. Neubeck, 94 N.J. Eq. 167 (E. & A. 1922); O‘Connell v. O‘Connell, 93 N.J. Eq. 603 (E. & A. 1922); Bilder v. Robinson, 73 N.J. Eq. 169 (Ch. 1907); 86 C. J. S., Tenancy in Common, §§ 77, 78; 4 Pomeroy, Equity Jurisprudence (5 ed. 1941), § 1421 at 1078-1081. Consequently, the same equitable considerations which warrant the denial of a partition in this case must аlso be measured against the necessity for an accounting. An assessment of these factors impels me to conclude that both partition and accounting should be denied. Plaintiff should retain only the possibility of a fee simple interest (the so-called “right of survivorship“) subject to defeasance should Mrs. Chase survive her husband. In King v. Greene, 30 N.J. 395, 412 (1959) we held that this “speculative” interest is freely alienable and can be made subject to execution for a spouse‘s debts. Cf. In re Ved Elva, Inc., 260 F. Supp. 978, 981-982 (D. N. J. 1966); Joseph Harris & Sons, Inc. v. Van Loan, 23 N.J. 466 (1957).
Although the incidents of estates by the entirety were founded upon the antiquated notion of legal unity of husband and wife, the continued utility and vitality of that form of joint ownership persist within specified circumstances. 4A Powell, Real Property, ¶ 623; 4 Thompson, Real Property (1961 rev.), §§ 1784-92 passim; Gery v. Gery, 113 N.J. Eq. 59, 64-65 (E. & A. 1933); Ten Eyck v. Walsh, 139 N.J. Eq. 533, 540 (Prerog. Ct. 1947). For example, as the majority observes, this tenancy “serves the purposes which are achieved in many states by statutory or constitutional homestead laws.” Ante at 265. In Fort Lee Savings & Loan Ass‘n v. LiButti, 106 N.J. Super. 211 (App. Div. 1969), reversed for reasons stated in the dissenting opinion below, 55 N.J. 532 (1970), Judge Carton, the dissenting judge in the Appellate Division, described this underlying social function as follows:
The social purpose of the tenancy by the entirety seems to be to solidify the marital status by encouraging and protecting home ownership and to protect and insulate the institution of marriage from the onslaught of creditors. Upon death of one of the spouses, it assures the survivor, normally the wife, possession of a home free and clear of the individual indebtedness of the other. [106 N.J. Super. at 216]
The language cited by the majority from Sanders v. Sanders, 118 N.J. Super. 327, 330 (Ch. Div. 1972) further indicates the continued viability and importance of certain features of this traditional tenancy. See also Ten Eyck v. Walsh, supra, 139 N.J. Eq. at 540.
Protection of the marital home when a family has suffered financial reversals, as in the present case, is thoroughly consistent with federal bankruptcy principles which extend a “fresh start” in life to honest but unfortunate debtors and their families. Local Loan v. Hunt, 292 U. S. 234, 244, 54 S. Ct. 695, 78 L. Ed. 1230, 1235 (1934); Stellwagon v. Clum, 245 U. S. 605, 617, 38 S. Ct. 215, 62 L. Ed. 507, 512 (1918); Williams v. U. S. Fidelity, 236 U. S. 549, 554-55, 35 S. Ct. 289, 59 L. Ed. 713, 716-17 (1915);
Obviously, were this estate relinquished as a family homestead or were the property devoted to a commercial use, the protective limitation on the rights of the plaintiff would dissipate and equity might then grant him an accounting. Precedent exists for providing relief under such circumstances. See, e. g., Schulz v. Ziegler, 80 N.J. Eq. 199 (E. & A. 1912) (husband voluntarily alienated his interest in the estate); Lohmann v. Lohmann, supra, 50 N.J. Super. 37 (husband and wife jointly owned several business properties including a tavern, a restaurant and a parking lot); Neubeck v. Neubeck, supra, 94 N.J. Eq. 167 (husband and wife jointly owned income-producing rental properties); Bilder v. Robinson, supra, 73 N.J. Eq. 169 (husband and wife jointly owned income-producing rental properties).
However, such situations are readily distinguishable from the case before us since here we are concerned with a family homestead. The court in Neubeck v. Neubeck, supra, 94 N. J. Eq. 167, for example, invoked equitable principles to reach a conclusion based on this distinction. Thus, while the
By advocating the denial of an accounting in the instant case, I should not be understood to suggest a complete resurrection of the ancient incidents of the estate by the entirety. The Married Women‘s Act of 1852 eliminated many of the more inequitable and objectionable aspects of that form of joint ownership. In addition, as former Chief Justice Weintraub observed in King v. Greene, supra, 30 N.J. at 413 (Weintraub, C. J., dissenting), “[t]he estate by the entirety is a remnant of other times.” Nevertheless, while it has been clearly held that the tenancy by the entirety “has many of the aspects of a tenancy in common, . . . [it] has not been abolished in this jurisdiction. It still exists in sui generis species of tenancy with its origin solely in the marriage state.” Gery v. Gery, supra, 113 N.J. Eq. at 64.
I recognize that case law regards the purchaser of a spouse‘s interest in a tenancy by the entirety as obtaining a present possessory interest as a tenant in common. Nonetheless, the entitlement of the purchaser to an accounting, where there is an ouster by one cotenant, has never been applied to a set of circumstances precisely analogous to that before us. I would urge that we not do so today. I would deny both partition and accounting in this case.
For reversal and remandment—Chief Justice HUGHES, Justices MOUNTAIN, CLIFFORD and SCHREIBER and Judge CONFORD—5.
Concurring and dissenting—Justices SULLIVAN and PASHMAN—2.