Entirely Out of the Question

By Daniel Richardson

RBS Citizens, N.A. v. Ouhrabka, 2011 VT 86.

As a brief primer for today’s opinion, it is important to know how people do and do not own property as a group of two or more.  For most groups who purchase a house or property together, they own it in a manner known as “tenants in common.”  That means they each own a separate share of the property that is in and of itself an undivided right to occupy and possess the property as a whole.  What does that mean?  It means that contrary to I Love Lucy, tenants in common lack the legal right to divide the house in half with tape. 

It means that you and your other tenant in common (remember, it does not have to be a spouse or family member or even friend) have the right to do anything to the property that you could do if you owned the property alone.  You can also sell your interest, give it away, or bequeath it in your will.  As you might expect such undivided rights can sometimes come into contact and require court intervention, but that is another case.

Today’s case, though, deals with a type of interest that might be more what Lucy Ricardo had in mind when she fought with Ricky.  Under the law, spouses can hold property in a different manner from other groups.  As “Tenants by the entirety,” spouses hold property as a single entity.  Like tenants in common, tenants by the entirety have an undivided right to the property as a whole, but they also have a right of survivorship, which means that when once one spouse dies all ownership immediately consolidates with the surviving spouse.  Nothing has to be filed to effectuate this change.  It happens automatically and without intervention of any sort.  As you would expect, such interests cannot be sold, given, or devised, separate and apart from each other.  They also effectively ensure that the couple, because it is available only to spouses, acts together or not at all.  It is a nifty concept so long as divorce is not involved. 

One of the best features of tenancy by the entirety is that creditors cannot reach into the property and attach one or another interest.  If debtor holds property with his wife, who is not liable to the creditor, then the property cannot be attached or seized by the creditor, and if you know anything about the credit game, such protection is worth its weight in IOUs.

Today’s case is a novel attack on this concept by a creditor seeking, somewhat desperately, to recover from one hell of debtor.  Debtor was the sole owner of a Rhode Island jewelry store chain that went belly up in 2010 to the tune of $15,000,000.  Debtor was personally liable for $500,000 of that debt, and Creditor sought to recover some of this by attaching Debtor’s East Ryegate getaway, which was valued at $250,000. 

Unfortunately for Creditor, Debtor owns the property with his wife as tenants by the entirety.  Recognizing that the law does not allow creditors to attach such interests, Creditor appeals to the SCOV and argues that tenancy by the entirety is an outdated and sexist concept that no longer serves a purpose or function in modern society.  Creditors note that tenancy by the entirety was popular when women lost their legal standing and rights to property upon marriage.  In Creditor’s view, the tenancy by the entirety concept was a security feature that allowed women to retain and regain their property if they survived their husbands.  In this view, modern advances in women’s rights and changes in the law have rendered this system superfluous and meaningless.  Therefore, it is unfair to allow individuals to perpetuate this form simply to hide or secure assets from attachment by legitimate creditors. 

The SCOV disagrees with this historical analysis.  Tenancy by the entirety, in the SCOV’s view, is not a mere by product of Victorian-era legal paternalism.  Tenancy by the entirety is an older and more establish doctrine whose history and uses have survived the growth of women’s rights and have remained fixed as part of society’s recognition that couples, in general, hold property differently from other groups.

The SCOV notes that tenancy by the entirety was intended, in part, to protect spouses and families from one spouse’s poor business decisions.  Far from being outdated, the method is a relevant way to ensure that the family is shielded, in part, from one spouse’s external fortunes—the precise thing that Creditor seeks to do.  This protection is a good thing, and the SCOV is not persuaded to the contrary—especially since Creditor could have sought Debtor’s spouse and required a guaranty from her when it was loaning the money to Debtor and his business.

Judgment is affirmed and the attachment is dismissed.  Debtor can continue his jaunts to East Ryegate for the foreseeable future.  But, given his recent fortunes, we expect to see a lot less bling, which, given the culture and mores of Vermont and the Northeast Kingdom, may be for the best.