REBECCA B. CONNELLY, Bankruptcy Judge.
This case concerns what happens to a debtor's property when she files a chapter 7 bankruptcy case. Ayse Hoole filed chapter 7 bankruptcy. Stephen Scott is her chapter 7 trustee. Mr. Scott is represented by counsel, Hannah W. Hutman, who filed a motion
Except for the subject of the motion (i.e., the nature and extent of the estate's interest in property), the essential facts are uncontested and fairly straightforward. Ayse Hoole filed a voluntary chapter 7 petition on March 19, 2017. ECF Doc. No. 1. On her Schedule A/B: Property, Ms. Hoole scheduled an interest in real property, located at 1126 Wadewood Ct., Woodstock, VA 22664 ("Wadewood Court"). Pet., Sch. A/B. Wadewood Court is described as a "Duplex or multi-unit building." Id. Ms. Hoole scheduled the value of Wadewood Court as $81,200, but she asserted the value of the portion she owns is only $812.
Before Ms. Hoole filed bankruptcy, she acquired Wadewood Court with her mother. The deed transferred Wadewood Court "to the Grantees, Ayse F. Hoole [the debtor] and Yuksel Gokkocabas [the debtor's mother], as joint tenants with right of survivorship as at common law, and not as tenants in common." Mot., Ex. A. The deed is recorded in the Clerk's Office of Shenandoah County.
The chapter 7 trustee filed a motion to determine the nature and extent of the estate's interest in Wadewood Court. The trustee contends the estate has a one-half interest in Wadewood Court. Id. ¶ 13. If the trustee is correct, he will seek approval to sell Wadewood Court and divide the proceeds equally with Ms. Gokkocabas. Id.
Ms. Hoole, however, disputes the trustee's argument. She contends her interest is nominal in value. She argues she does not have a one-half interest because she did not provide one half of the consideration for the property. Because her mother provided the funds to purchase Wadewood Court, Ms. Hoole insists that only her mother would be entitled to the sale proceeds if Ms. Hoole filed a partition action in state court. Resp. ¶ 1-2. According to Ms. Hoole, if she would be unable to claim half of the proceeds in a partition sale through the state court, then her trustee likewise should be unable to claim half of the proceeds from a sale through the bankruptcy court. See id. ¶ 2. In support of her view, Ms. Hoole notes that "[t]he survivorship aspect of the joint tenancy is just that—a simple and sure manner of transferring property upon death." Id. ¶ 3. She also notes that her mother has a right to bring a partition action and recoup the money her mother paid to buy Wadewood Court. Id.
The Court has jurisdiction over Ms. Hoole's bankruptcy case by virtue of 28 U.S.C. §§ 1334(a) and 157(a), the delegation made to this Court by Order of Reference from the District Court entered on December 6, 1994, and Rule 3 of the Local Rules of the United States District Court for the Western District of Virginia. This Court has authority to determine if Ms. Hoole's interest in property is part of her bankruptcy estate and to what extent a bankruptcy trustee may administer the property. This is because matters concerning the administration of the estate are "core" proceedings within the meaning of 28 U.S.C. § 157(b)(2)(A).
The filing of a voluntary chapter 7 bankruptcy petition creates a bankruptcy estate. 11 U.S.C. § 541(a). Section 541 of the Bankruptcy Code provides that property of the estate includes "all legal or equitable interests of the debtor in property as of the commencement of the case." Id. § 541(a)(1). When Ms. Hoole filed her petition on March 17, 2017, all of her legal and equitable interests in property became property of her bankruptcy estate. Because she had an interest in Wadewood Court as of the commencement of her case, her interest in Wadewood Court became part of her bankruptcy estate. Up to this point, the parties agree. They do not question that Ms. Hoole's interest in Wadewood Court came into her bankruptcy estate. But they do question the nature of that interest and by extension the value of that interest now in the trustee's hands. For this reason, the trustee asks this Court to determine Ms. Hoole's interest in Wadewood Court. The answer is found in the language of the deed and the Virginia Code.
Va. Code § 55-20.1 (emphasis added). The deed conveyed Wadewood Court to Ms. Hoole and Ms. Gokkocabas "as joint tenants with right of survivorship." This language in the deed is quite clear, echoing the language of the Virginia Code. Because of this language, under Virginia law, it is presumed that Ms. Hoole and Ms. Gokkocabas own Wadewood Court as joint tenants with the right of survivorship as at common law.
"The common law characterized each joint tenant as possessing the entire estate, rather than a fractional share: `[J]oint-tenants have one and the same interest . . . held by one and the same undivided possession.'" United States v. Craft, 535 U.S. 274, 280 (2002) (quoting 2 William Blackstone, Commentaries on the Laws of England 180 (1766)). Under the common law, a joint tenancy requires four unities: time, title, interest, and possession. See Pitts v. United States, 408 S.E.2d 901, 903 (Va. 1991) (citing 4 Thompson, Commentaries on the Modern Law of Real Property §§ 1775-76, -84, -85 (Repl. Vol. 1979)) ("A joint tenancy and a tenancy by the entirety shared four essential characteristics, that is, unity of time, unity of title, unity of interest, and unity of possession."); see also Bunker v. Peyton (In re Bunker), 312 F.3d 145, 151 (4th Cir. 2002); In re Sampath, 314 B.R. 73, 79 n.5 (Bankr. E.D. Va. 2004); Jones v. Conwell, 314 S.E.2d 61, 64 (Va. 1984).
The crux here is the unity of interest requirement. "`Unity of interest,' as one of the four unities required for the existence of a joint tenancy, means that the joint tenants' shares are all equal and the duration and quality, legal or equitable, of their estates are the same." 20 Am. Jur. 2d Cotenancy and Joint Ownership § 5 (1964). The lack of one unity of the joint tenancy leads to the destruction of the nature of the interest. Ms. Hoole admits that she and her mother own Wadewood Court as joint tenants with the right of survivorship.
Under Virginia law, joint tenants own the entire property with the other joint tenants. Because Ms. Hoole's interest in the property is as a joint tenant, she has an interest equal to the interest of her co-tenant. Put differently, Ms. Hoole and her mother, as joint tenants, each have an equal interest in the entire property. Ms. Hoole had this interest as a joint tenant at the time she filed her petition. Consequently, when she filed her bankruptcy petition, her interest as a joint tenant with the right of survivorship became property of her bankruptcy estate.
Ms. Hoole argues that a joint tenancy may be owned unequally. In support of her argument, Ms. Hoole cites Virginia Code § 64.2-305(C)(3). The subsection cited by Ms. Hoole provides that
Va. Code § 64.2-305. Ms. Hoole's reliance on this provision is misplaced. The provision confines its applicability to married spouses. Because Ms. Hoole is not married to her living mother, this section governing the elective share of surviving spouses is inapplicable.
The deed is quite clear, specific, and unequivocal on the extent and nature of Ms. Hoole's interest in the property. Ms. Hoole, however, attempts to introduce extrinsic evidence to explain that the equal interest on the face of the deed is not so self-evident. As evidence to support an unequal joint tenancy, Ms. Hoole points out that her mother purchased Wadewood Court and that her mother intended to use the joint tenancy for estate planning purposes.
In Virginia, the "parol evidence rule is a time-honored fixture in the law." Amos v. Coffey, 320 S.E.2d 335, 337 (Va. 1984). The deed is "a complete, unambiguous, unconditional, written instrument," and accordingly the Court declines to allow the admission of extrinsic evidence to vary or alter the clear terms of the deed. The Court interprets the plain, unambiguous language of the deed to have created a joint tenancy and does not need evidence of the external expectations of the parties.
To bolster her argument that extrinsic evidence is necessary to determine the portion owned by each joint tenant, Ms. Hoole cites Virginia Code § 58.1-3211.1. This section addresses a governing body's ability to provide for a prorated tax exemption or deferral of tax on real property for joint tenants aged sixty-five or older who jointly hold dwellings with joint tenants who are under the age of sixty-five. Va. Code § 58.1-3211.1(A). Specifically, it says "[a]s a condition of eligibility for such tax exemption or deferral, the joint owners of the dwelling shall be required to furnish to the relevant local officer sufficient evidence of each joint owner's ownership interest in the dwelling." Id. Ms. Hoole argues that, because the Virginia Code requires a joint tenant to furnish to the relevant local revenue officer evidence of each joint tenant's ownership interest in the dwelling before claiming a tax exemption or deferral, extrinsic evidence is required before this Court may determine the interest. Her argument is unpersuasive. The statute provides for certain tax relief along with a mechanism for a property owner to show eligibility for such relief. Not surprisingly, the law shifts the responsibility to show eligibility for tax relief on the property owner rather than the local taxing authority. The provision is specific as to its applicability (tax relief). Nothing in the language of the tax provision suggests it negates Virginia Code § 55-20.1.
The trustee asks this Court to determine that the estate's interest in Wadewood Court is a one-half interest. Ms. Hoole asks this Court to find that the estate's interest in Wadewood Court is at most nominal. Based on a review of the facts and the law, the Court finds that the estate's interest in Wadewood Court is in the nature of a joint tenant with an undivided interest in the entire property with the right of survivorship. Cf. In re Benner, 253 B.R. 719,723 (Bankr. W.D. Va. 2000) ("In this case, the Debtor owned all of the property under Virginia law and she shared it with her non-debtor spouse. This is the interest that became property of the estate under 11 U.S.C. § 541 and this is what the trustee had to liquidate.").
Although this finding answers the question in dispute, the real dispute between the parties seemingly lies under the surface. Specifically, may the trustee conduct a sale of Wadewood Court pursuant to section 363(h) of the Bankruptcy Code, and if so, how should the proceeds of such a sale be divided? The trustee suggests the proceeds would be divided equally between Ms. Hoole's creditors and her mother. Ms. Hoole argues that her mother should receive all but a nominal amount,
For the trustee to sell Wadewood Court for the benefit of Ms. Hoole's creditors, he must meet the requirements in section 363(h). Such a motion is not before the Court, and therefore the Court need not answer that question now. All the same, in this proceeding, Ms. Hoole challenged a trustee's ability to conduct a partition sale of Wadewood Court under these facts. For these reasons, the Court will address a trustee's sale powers generally.
A bankruptcy trustee has the duty to collect and reduce to money nonexempt property of the estate. 11 U.S.C. § 704. As such, the bankruptcy trustee has the duty, and the power, to sell property. Id. This duty is for the purpose of satisfying creditors' claims. Ms. Hoole suggests that the trustee's power is limited to her state law rights to partition as joint tenant. The trustee's power is not so limited.
Virginia Code § 8.01-81 sets out who may compel partition of land:
Va. Code § 8.01-81 (emphasis added). This means that a lien creditor may compel partition under the Virginia Code. The Bankruptcy Code provides in section 544(a) that the trustee has all the rights and powers of a hypothetical lien creditor. 11 U.S.C. § 544(a). Putting these sections together, Mr. Scott, chapter 7 trustee, has the power, as a hypothetical lien creditor, to compel a partition of property under the Virginia Code. What is more, if the property cannot be divided, the Bankruptcy Code allows a trustee to sell the undivided joint property as long as certain conditions are met. See 11 U.S.C. § 363(h).
Ms. Hoole relies heavily on Virginia Code § 8.01-31 to support her theory that the trustee may not receive any more than she could if a sale were to take place. Section 8.01-31 provides "[a]n accounting in equity may be had against any fiduciary or by one joint tenant, tenant in common, or coparcener for receiving more than comes to his just share or proportion, or against the personal representative of any such party." Va. Code § 8.01-31. Under this provision, Ms. Hoole argues, Ms. Hoole would only be able to receive what she invested in the townhouse. So, Ms. Hoole argues that the trustee would only be entitled to what would be Ms. Hoole's fair share (the amount of her investment) from the proceeds of such a sale. Ms. Hoole overlooks that this action is not between two joint tenants against each other. Ms. Hoole relies upon a section of the Virginia Code which addresses potential rights of one joint tenant against another, as opposed to the rights of a holder of a judgment lien. Because the chapter 7 trustee by statute has the powers of a hypothetical judgment lien creditor, his powers are not addressed in the statute Ms. Hoole cites.
Nevertheless, the trustee has not yet filed any motion seeking to sell or partition Wadewood Court. The Court will rule on such a motion, if filed, and will reserve ruling on defenses thereto, if any, should they too be filed.
The Court will issue a separate order based on the conclusions in this Opinion.
The Clerk is directed to send copies of this Opinion to the debtor, counsel for the debtor, the chapter 7 trustee, and counsel for the chapter 7 trustee.
11 U.S.C. § 363(h).
