Menu    3 ABR 526 

UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF ALASKA
In re: Case No. A94-00159-DMD)
)
ARON DARREL FINCHER and SUSAN)
E. FINCHER )
Debtors.      )
________________________________)Bancap No. 94-3026
ARON DARRELJ FINCHER and SUSAN )
E. FINCHER, )
Plaintiffs,      )Adv. No. A94-00159-00l-DMD
) Chapter 7
v.)
)
ROBERT E. EVANS and MILDRED )
M. EVANS, )
Defendants.      )
______________________________)

MEMORANDUM DECISION AND ORDER

          This is an action for invalidation of a judicial lien under 11 U.S.C. § 522(f) and for other relief. This court has jurisdiction over the lien invalidation portion of the action pursuant to 28 U.S.C. § 157(b)(2)(B), (K), and (O). The plaintiffs also seek damages for wrongful execution and conversion. I will grant the request for lien invalidation but dismiss the complaint for wrongful execution and conversion without prejudice.

    Facts

          The plaintiffs own a 1986 Nissan Maxima, which has a stipulated value of $5,700. Title to the vehicle is in the name of Aron Darrel Fincher or Susan E. Fincher. The defendants, Robert and Mildred Evans, sued plaintiff Aron Fincher and obtained a judgment in the amount of $3,458.74 against him on October 27, 1993. They obtained a writ of execution on February 1, 1994 and seized the Maxima. The Finchers filed a Chapter 7 bankruptcy shortly after the seizure and initiated this action.

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          Using state exemptions, the plaintiffs claimed the Maxima as fully exempt in their bankruptcy schedules. No objections were filed to their claim of exempt property.

    Analysis

          11 U.S.S. §522(f) allows a debtor to avoid a lien to the extent that such lien impairs an exemption to which the debtor is entitled. Here, the debtors contend that the Maxima is exempt because no objections were submitted to their claim of exempt property. Exemptions are allowed absent a timely objection. Taylor v. Freeland & Kronz, 112 S.Ct. 1644 (1992). As the BAP pointed out in In Re Morgan, 149 B.R. 147, 151 (9th Cir. BAP 1993), however, the failure of a party in interest to object to a debtor's claim of exempt property does not preclude a judicial lien holder from defending a lien avoidance action and challenging the exemption. The exemption is at issue.

          The Finchers held the vehicle as tenants by the entirety. In Faulk v. Estate of Haskins, 714 P.2d 354, 355 (Alaska 1986), the court held that personal property which a husband and wife jointly possess and use is presumed to be held in tenancy by the entirety. Unlike some other jurisdictions, Alaska allows the levy and sale of the interest of an individual in tenancy by the entirety property, subject to the individuals right to claim an exemption. A.S. 09.38.100(a). Here, Darrell Fincher claims an exemption of $3,450 for his interest in the automobile, pursuant to AS 09.38.020(e).

          The defendants argue that because either of the Finchers can individually transfer the vehicle under the provisions of the Alaska Administrative Code, their lien somehow applies to the full value of the vehicle. I disagree. First, 13 AAC 70.030 only applies to voluntary transfers, not execution sales. Nothing in the Alaska statutes or regulations supports the broad reading requested by the defendants. Second, the defendants ignore Faulk and Mrs. Finchers interest in the vehicle. They cannot disregard her rights in the vehicle when conducting an execution sale. A.S. 09.38.100(a).

          The Finchers argue that their individual interests in the vehicle equal 50% of its value, or $2850. Their analysis is flawed, however, because it fails to recognize the fundamental nature of a tenancy by the   TOP    3 ABR 528  entirety. As noted in 41 Am Jur 2d, Husband and Wife, § 59:

    An estate by the entireties is dependent for its creation and also for its continuance on the marital relation of the cotenants, for husband and wife unity of ownership, per tout and not per my, of all and not of moieties, in addition to the unities of time, title, interest, and possession, characterizes and is essential to an estate by the entireties and clearly distinguishes it from joint tenancies and tenancies in common.
    "Per tout and not per my" means by the whole and not by the half. Each tenant by the entirety has a right to the entire estate, be it real or personal. The value of Mr. Finchers interest in the automobile cannot be determined by simply taking half of the value of the vehicle to determine the exemption amount.

          Mr. Fincher's interest in the vehicle could be valued by taking into account Mrs. Fincher's life expectancy, estimating the depreciated value of the automobile at the time of her death, and discounting that value to the present. Such an exercise could add an element of mathmatical precision to the determination of an exemption amount. From my viewpoint, however, this illustrates the futility of attempting to execute upon such an interest in property. Because another party retains a right to time, title, interest and possession in the same property, Mr. Fincher's interest in the vehicle, at best, has only nominal value. While an interest in real property may be partitioned, a car can't be partitioned. Moreover, the cost of partitioning or severing the interest of the debtor would be substantial. As noted at page 37 of the Alaska Court System's Judgment Creditor Booklet (August 1993) on Execution

    Procedure:

    6. What if the debtor's property is owned with another and they are not a partnership?

      For example: What if the debtor is a husband and the title to the debtor's property is in the name of both husband and wife, can the property still be executed upon to pay the husband's debts?

      Answer: Yes. AS 09.38.100(a). However, it is important to remember that only the debtor's interest in the property can be levied upon. Therefore, even after the sale of the debtor's interest in the property, the original co-owner (in this case, the wife) would still have an ownership interest in the property. This might
        TOP    3 ABR 529  not be a workable situation. To separate these interests might involve a court partition action. As a practical matter, this procedure is complicated and you should contact a lawyer for assistance.

          Because of the inherent limitations imposed by a tenancy by the entirety, I find the value of Mr. Fincher's interest in the 1986 Maxima to be nominal and certainly less than the allowable exemption of $3,450. The defendants judicial lien impairs an exemption to which Mr. Fincher would have been entitled under state law. The plaintiffs are entitled to avoid the lien in accordance with 11 U.S.C. § 522(f).

          The plaintiffs also seek damages for wrongful execution and conversion. The defendants have filed a demand for a jury trial on such issues. I will abstain from hearing the secondary claims due to jurisdictional concerns. These issues are best left for a state court.

    IT IS THEREFORE ORDERED:

      1. The execution lien of the defendants Robert E. Evans and Mildred M. Evans against a 1986 Nissan Maxima owned by the plaintiffs Aron Dale Fincher and Susan E. Fincher is avoided pursuant to 11 U.S.C. § 522(f) and henceforth the vehicle is free and clear of such lien.

      2. Insofar as the plaintiffs seek additional relief from the defendants, other than costs, their complaint is dismissed without prejudice.

      3. The plaintiffs are awarded their costs. Each party shall pay its own attorneys fee's.

    Let judgment be entered accordingly.

      DATED: October 27, 1994.

                  BY THE COURT

                  DONALD MacDONALD IV
                  United States Bankruptcy Judge