JAMES J. GIBSON & DR. LORI G. GIBSON v. WACHOVIA BANK , 255 So. 3d 944 ( 2018 )


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  •                NOT FINAL UNTIL TIME EXPIRES TO FILE REHEARING
    MOTION AND, IF FILED, DETERMINED
    IN THE DISTRICT COURT OF APPEAL
    OF FLORIDA
    SECOND DISTRICT
    JAMES J. GIBSON and LORI G.                   )
    GIBSON,                                       )
    )
    Appellants,                      )
    )
    v.                                            )      Case No. 2D16-5632
    )
    WELLS FARGO BANK, N.A., as                    )
    successor by merger to Wachovia Bank,         )
    )
    Appellee.                        )
    )
    Opinion filed July 13, 2018.
    Appeal from the Circuit Court for
    Hillsborough County; Robert A. Foster, Jr.,
    Judge.
    Jennifer E. Jones of McIntyre Thanasides
    Bringgold Elliott Grimaldi & Guito, P.A.,
    Tampa; and Shyamie Dixit and Robert L.
    Vessel of the Dixit Law Firm, P.A., Tampa,
    for Appellant Lori Gibson.
    Amy J. Winarksy of Marcadis Singer, P.A.,
    Tampa, for Appellant James J. Gibson.
    Ryan W. Owen of Adams and Reese, LLP,
    Sarasota, for Appellee.
    LaROSE, Chief Judge.
    Dr. Lori and James Gibson appeal the final summary judgment entered in
    favor of judgment creditor, Wells Fargo Bank, N.A, in proceedings supplementary. We
    have jurisdiction. See Fla. R. App. P. 9.030(b)(1)(A). We must determine whether,
    under Florida law, a creditor may satisfy a debt incurred by one spouse by garnishing a
    federal tax refund issued in both spouses' names and deposited in their joint checking
    account. Florida law compels us to conclude that the joint tax refund is tenancy by the
    entirety (TBE) property not subject to garnishment. Thus, we reverse.
    Background
    In December 2009, Wachovia Bank sued Mr. Gibson for breach of a
    promissory note that he, alone, executed in March 2008. The parties stipulated to the
    entry of a final judgment in favor of Wachovia for over one million dollars.
    Following entry of final judgment, the Gibsons filed amended joint federal
    tax returns for tax years 2003 through 2006, seeking retroactive reduction in their tax
    burden. See American Recovery and Reinvestment Act of 2009, Pub. L. No. 111-5, at
    § 1211, 123 Stat. 115 (2009) (amending section 172(b)(1)(H) of the Internal Revenue
    Code to extend the carryback period to up to five years for 2008 net operating losses
    incurred by an eligible small business). Based upon these returns, the Internal
    Revenue Service issued two tax refund checks; one in June 2011 and the other in April
    2014. Each check was payable to both Mr. Gibson and his wife, Dr. Gibson. The
    refund checks totaled over two million dollars. The Gibsons deposited both checks into
    their joint account at SunTrust Bank. The parties agree that the Gibsons held the
    SunTrust account as TBE property.
    In October 2014, Wells Fargo Bank, as successor by merger to Wachovia,
    moved to garnish the SunTrust account. Wells Fargo sought proceedings
    supplementary under section 56.29, Florida Statutes (2014), and moved to implead Dr.
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    Gibson as a party. Wells Fargo alleged that it could execute on the federal tax refunds
    in the account to satisfy Mr. Gibson's outstanding judgment.
    The trial court granted Wells Fargo's motions for proceedings
    supplementary and impleader. Thereafter, Wells Fargo moved for summary judgment.
    The Gibsons opposed the motion and filed their own summary judgment motion,
    arguing that they held the joint federal tax refunds as TBE. They also maintained that
    the refunds related to tax years prior to execution of the 2008 promissory note.
    The trial court granted Wells Fargo's motion and denied the Gibsons'
    motion. The trial court found that the refunds "were attributable solely to [Mr. Gibson]'s
    economic activities." Further, the trial court was persuaded by Wells Fargo's argument
    that, because the IRS has the ability to apportion tax refunds to each individual spouse,
    issuance of the joint tax refund checks did not establish TBE property. The trial court
    entered a final summary judgment providing that Wells Fargo could recover from Dr.
    and Mr. Gibson "jointly and severally and as tenants by the entireties, the sum of
    $1,310,491.78" from the SunTrust Account.
    Analysis
    On appeal, the Gibsons argue that the joint tax refunds, issued in both of
    their names and deposited in their joint bank account, are TBE property. Therefore,
    Wells Fargo, a creditor to only Mr. Gibson, cannot reach those funds to satisfy his
    individual debt. Although they acknowledge that the IRS has statutory authority to
    attach TBE property in certain circumstances, the Gibsons contend that third-party
    creditors, such as Wells Fargo, lack such authority. The trial court, in their view, erred
    in ruling for Wells Fargo.
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    A movant is entitled to summary judgment "if the pleadings,
    depositions, answers to interrogatories, admissions,
    affidavits, and other materials as would be admissible in
    evidence on file show that there is no genuine issue as to
    any material fact and that the moving party is entitled to a
    judgment as a matter of law."
    Estate of Githens ex rel. Seaman v. Bon Secours-Maria Manor Nursing Care Ctr., Inc.,
    
    928 So. 2d 1272
    , 1274 (Fla. 2d DCA 2006) (quoting Fla. R. Civ. P. 1.510(c)). The
    parties agree that there are no material facts in dispute. Thus, we review the trial
    court's entry of summary judgment as a pure question of law. Our review is de novo.
    See Shaw v. Tampa Elec. Co., 
    949 So. 2d 1066
    , 1069 (Fla. 2d DCA 2007) ("The
    general 'standard of review governing a trial court's ruling on a motion for summary
    judgment posing a pure question of law is de novo.' " (quoting Major League Baseball v.
    Morsani, 
    790 So. 2d 1071
    , 1074 (Fla. 2001))).
    Finding its origins in paternalistic ideas of property ownership, see First
    Nat'l Bank of Leesburg v. Hector Supply Co., 
    254 So. 2d 777
    , 779 (Fla. 1971) ("The
    historic basis for the [TBE] was the assumed incapacity of married women to hold
    property individually."), TBE's theoretical underpinnings suit a contemporary ethos.
    Indeed, "the distinctive feature of a tenancy by the entireties, that husband and wife hold
    property as an indivisible unit, renders this form of ownership equally well-suited to the
    concept of modern-day marriage as a partnership between equals." See Beal Bank,
    SSB v. Almand & Assocs., 
    780 So. 2d 45
    , 52 n.7 (Fla. 2001).
    In Beal Bank, the Florida Supreme Court answered the following
    rephrased certified question in the affirmative:
    In an action by the creditor of one spouse seeking to garnish
    a joint bank account titled in the name of both spouses, if the
    unities required to establish ownership as a tenancy by the
    entireties exist, should a presumption arise that shifts the
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    burden to the creditor to prove that the subject account was
    not held as a tenancy by the entireties?
    
    Id. at 48.
    In so doing, the court eliminated any lingering distinctions between real
    property and personal property held jointly by wife and husband. See Cacciatore v.
    Fisherman's Wharf Realty Ltd. P'ship, 
    821 So. 2d 1251
    , 1253 (Fla. 4th DCA 2002)
    ("[Beal Bank] indicated that the time had come to eliminate that disparity and to accord
    to personal property in general (not just bank accounts) the same presumption of
    tenancy by the entireties when jointly owned by husband and wife as that accorded real
    property jointly owned by husband and wife."). And, the court adopted a presumption
    "shifting the burden to the creditor to prove by a preponderance of evidence that a
    tenancy by the entireties was not created." Beal 
    Bank, 780 So. 2d at 58-59
    (footnote
    omitted). Significantly, Beal Bank affirmed that "property held by husband and wife as
    tenants by the entireties belongs to neither spouse individually, but each spouse is
    seized of the whole." 
    Id. at 53.
    The court spoke broadly, finding strong policy considerations supporting a
    tenancy-by-the-entireties presumption when "a married couple jointly owns personal
    property." 
    Id. at 57;
    see also In re Daniels, 
    309 B.R. 54
    , 59 (Bankr. M.D. Fla. 2004)
    ("[W]hile the court in Beal Bank explicitly addressed an issue involving only marital bank
    accounts, the court also discussed in detail ownership issues surrounding marital
    personal property in general and expressly concluded that strong policy reasons exist
    for extending the tenancy by the entireties presumption to jointly owned marital personal
    property, not just to financial accounts.").
    Beal Bank noted that TBE property enjoys six unities:
    (1) unity of possession (joint ownership and control);
    (2) unity of interest (the interests in the account must be
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    identical); (3) unity of title (the interests must have originated
    in the same instrument); (4) unity of time (the interests must
    have commenced simultaneously); (5) survivorship; and
    (6) unity of marriage (the parties must be married at the time
    the property became titled in their joint 
    names). 780 So. 2d at 52
    (footnote omitted). The unity of marriage is the unique quality of TBE
    property. 
    Id. ("Because of
    the sixth characteristic—unity of marriage—a tenancy by the
    entireties is a form of ownership unique to married couples."); In re Franzese, 
    383 B.R. 197
    , 201 (Bankr. M.D. Fla. 2008) ("Tenancy by the entireties, as defined by applicable
    Florida law, is a unique form of property ownership only married couples may enjoy.").
    State law creates and defines property interests. Butner v. United States,
    
    440 U.S. 48
    , 55 (1979). Federal tax law, on the other hand, "creates no property rights
    but merely attaches consequences, federally defined, to rights created under state law."
    United States v. Nat'l Bank of Commerce, 
    472 U.S. 713
    , 722 (1985) (quoting United
    States v. Bess, 
    357 U.S. 51
    , 55 (1958)). Under Florida law, special protections
    assigned to TBE property which are not afforded to other forms of property ownership
    underscore the distinctiveness of TBE property. For example, and particularly relevant
    for us, "[f]unds owned by a husband and wife as tenants by the entireties are 'beyond
    the reach of a creditor of either one of the tenants. Such funds are immune from
    garnishment except where the debt was incurred by both spouses.' " Branch Banking &
    Tr. Co. v. Ark Dev./Oceanview, LLC, 
    150 So. 3d 817
    , 821 (Fla. 4th DCA 2014) (quoting
    Antuna v. Dawson, 
    459 So. 2d 1114
    , 1116-17 (Fla. 4th DCA 1984)).
    [I]f property is held as a joint tenancy with right of
    survivorship, a creditor of one of the joint tenants may attach
    the joint tenant's portion of the property to recover that
    joint tenant's individual debt. However, when property is
    held as a tenancy by the entireties, only the creditors of both
    the husband and wife, jointly, may attach the tenancy by
    the entireties property; the property is not divisible on behalf
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    of one spouse alone, and therefore it cannot be reached to
    satisfy the obligation of only one spouse.
    Beal 
    Bank, 780 So. 2d at 53
    (emphasis added) (citation omitted); accord In re
    Benzaquen, 
    555 B.R. 63
    , 66 (Bankr. S.D. Fla. 2016) ("[P]roperty held as TBE can only
    be attached by joint creditors of both a husband and wife." (citing Beal 
    Bank, 780 So. 2d at 45
    )).
    The Gibsons filed their tax returns jointly as husband and wife. They
    argue that "once the check was issued, both Dr. Gibson and her husband [possessed
    the six unities of TBE property]." We agree. It is important, however, to focus on the
    antecedent act of filing joint returns. We assess, initially, whether TBE status can attach
    to the anticipated receipt of a tax refund.
    The field of bankruptcy law provides the key. "While a debtor may not
    obtain a refund until the tax year closes, the predicates for receiving the refund may
    occur prior to filing the bankruptcy petition." In re Uttermohlen, 
    506 B.R. 142
    , 148
    (Bankr. M.D. Fla. 2012) (citing In re Witko, 
    374 F.3d 1040
    , 1043 (11th Cir. 2004)).
    "Thus, a debtor possesses 'an existing interest [in the refund] at the time of filing even
    though his enjoyment of that interest was postponed.' " 
    Id. (alteration in
    original)
    (quoting In re 
    Witko, 374 F.3d at 1043
    ). Naturally, therefore, by filing jointly, the
    Gibsons had an expectation of a refund that satisfied the requisite unities of TBE
    property. See 
    id. ("The Court
    finds that the Uttermohlens had an interest in the
    prospective refund at the time of filing and the law presumes that they intended to
    possess that interest as TBE. They evinced that intent by filing a joint tax refund
    making them jointly and severally responsible for any tax liability, and received a refund
    check in both their names."). And once the checks were issued, because either party
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    could have deposited them, the unity of survivorship was satisfied. Cf. § 735.302(1)(a),
    Fla. Stat. (2014) (providing for the disposition of a federal income tax refund by a
    surviving spouse).
    We are not persuaded by Wells Fargo's efforts to draw the line between
    the issuance of the refund checks, in the first instance, and their subsequent deposits in
    the Gibsons' joint account. This temporal legerdemain is insufficient to undermine our
    determination that the refunds were TBE property. When TBE property is established,
    its subsequent transfer to another asset does not terminate the unities of title or
    possession. See Passalino v. Protective Grp. Sec., Inc., 
    886 So. 2d 295
    , 297 (Fla. 4th
    DCA 2004) ("Transferring the proceeds of the sale of entireties property to a trustee for
    the benefit of the husband and wife does not terminate the unities of title or possession,
    where the parties clearly intended their property to be held as a tenancy by the
    entireties by exercising beneficial ownership of the property and controlling the
    property's disposition."). The Gibsons possessed an interest in their prospective
    refunds as TBE property at the time they filed their amended joint returns. That interest
    continued intact following issuance of the checks and their deposits into their joint back
    account.1
    Wells Fargo argued to the trial court that the tax code's treatment of
    refunds, and the IRS's statutory authority to impose tax liens, control any determination
    of whether the tax refunds are TBE property. See 26 U.S.C.§§ 6321 ("If any person
    liable to pay any tax neglects or refuses to pay the same after demand, the amount
    1As underscored by Florida law, "[a]ny deposit or account made in the
    name of two persons who are husband and wife shall be considered a tenancy by the
    entirety unless otherwise specified in writing." § 655.79(1), Fla. Stat. (2014). Our
    record is devoid of a writing specifying otherwise.
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    (including any interest, additional amount, addition to tax, or assessable penalty,
    together with any costs that may accrue in addition thereto) shall be a lien in favor of the
    United States upon all property and rights to property, whether real or personal,
    belonging to such person."), 6402(a) (2012) ("In the case of any overpayment, the
    Secretary . . . may credit the amount of such overpayment, including any interest
    allowed thereon, against any liability in respect of an internal revenue tax on the part of
    the person who made the overpayment and shall . . . refund any balance to such
    person."). Wells Fargo claimed that because the IRS may apportion tax refunds to each
    spouse, the joint tax refund checks issued to the Gibsons were not TBE property.
    The argument is unavailing. Whatever rules apply to the IRS do not
    necessarily apply to a creditor such as Wells Fargo. "[W]e are, of course, not bound by
    the [Middle District]'s decisions on questions of Florida law." Liberty Am. Ins. Co. v.
    Kennedy, 
    890 So. 2d 539
    , 541 (Fla. 2d DCA 2005) (citing Int'l Ass'n of Bridgeworkers v.
    Blount Int'l, Ltd., 
    519 So. 2d 1009
    , 1012 (Fla. 2d DCA 1987), for the "holding that state
    courts, in construing and interpreting state law, are not bound by the decisions of
    federal courts"). However, we find Judge Covington's cogent analysis in Uttermohlen,
    which presents a similar factual scenario as that presented in our case, compelling.
    Uttermohlen filed for bankruptcy protection. 
    Uttermohlen, 506 B.R. at 144
    .
    He later amended his petition to claim a tax refund of over $10,000, issued to him and
    his wife jointly, as exempt property. 
    Id. The bankruptcy
    trustee unsuccessfully objected
    to the exemption. 
    Id. The district
    court affirmed the bankruptcy court's order on appeal.
    Id.; see also 28 U.S.C. § 158(a)(1) (2006) (conferring appellate jurisdiction upon district
    courts of a bankruptcy court's "final judgments, orders, and decrees").
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    Judge Covington began her analysis by noting that, under Beal Bank,
    policy considerations favored the presumption that personal property owned jointly by a
    married couple is TBE property. 
    Uttermohlen, 506 B.R. at 146
    . She then discussed In
    re Sinnreich, 
    391 F.3d 1295
    (11th Cir. 2004), and United States v. Craft, 
    535 U.S. 274
    (2002), in a manner that undermines Wells Fargo's position:
    [In Sinnreich], a creditor sought to reach assets
    owned by the debtor and his non-filing spouse as TBE,
    applying the rationale of United States v. Craft, 
    535 U.S. 274
    , 
    122 S. Ct. 1414
    , 
    152 L. Ed. 2d 437
    (2002). In Craft, the
    Supreme Court held that because each spouse had certain
    individual rights in TBE property that fell within the meaning
    of property defined by the Internal Revenue Code, the IRS
    may attach a lien to TBE property. 
    Id. at 282.
    In Sinnreich,
    the Eleventh Circuit declined to extend the holding in Craft to
    other creditors, finding that the IRS had 'unique powers' to
    attach a lien to TBE 
    property. 391 F.3d at 1297
    . Otherwise,
    the TBE protection afforded by the Bankruptcy Code would
    be rendered superfluous. 
    Id. at 1298.
    Uttermohlen, 506 B.R. at 147
    ; see also 
    Sinnreich, 391 F.3d at 1298
    ("Simply stated, the
    Craft Court announced the rule that the IRS's federal statutory powers to tax and attach
    liens to property trumped any state property rights afforded to a taxpayer who holds
    property by the entireties with her spouse. The Craft Court gave no indication that its
    holding could be extended beyond a tax collection context . . . . "). Judge Covington
    then observed that other courts, too, had found that federal law "create[d] a narrow
    exception allowing only the IRS to defeat the unity of interest that is presumed to exist
    under Beal Bank." 
    Uttermohlen, 506 B.R. at 147
    (quoting In re Newcomb, 
    483 B.R. 554
    , 558 (Bankr. M.D. Fla. 2012) (unpublished memorandum opinion)). Other creditors
    enjoy no such special status.
    Some Florida bankruptcy court decisions are not in accord with
    Uttermohlen. See, e.g., In re Morine, 
    391 B.R. 480
    , 482 (Bankr. M.D. Fla. 2008)
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    ("Because the refund is attributable solely to the Debtor's income and not to his non-
    debtor spouse, the interest in the refund check only belongs to the Debtor."); In re Kant,
    21 Fla. L. Weekly Fed. B59 (Bankr. M.D. Fla. Apr. 12, 2006) ("[A] husband and wife may
    not have the unity of interest in a tax refund that is necessary for a tenancy by the
    entireties."); accord In re Ascuntar, 
    487 B.R. 319
    , 322-23 (Bankr. S.D. Fla. 2013)
    (reasoning that the debtor could not establish TBE ownership of the refund because
    there was no unity of interest and concluding that, unless the tax refund is received
    prepetition and deposited into a TBE account, the expected future income existing on
    the filing of the individual's bankruptcy petition is not owned as TBE with his or her
    spouse); In re Rice, 
    442 B.R. 140
    , 143-44 (Bankr. M.D. Fla. 2010). Contra In re Smith,
    26 Fla. L. Weekly Fed. B111 (Bankr. M.D. Fla. Feb. 18, 2016) (finding Ascuntar's
    "holding inconsistent with the fact that there is a presumption in favor of ownership of a
    joint tax refund as TBE when owned by a married couple, as well as, the decision . . . in
    In re Sinnreich, 
    391 F.3d 1295
    (11th Cir. 2004)" and "[i]nstead, . . . adopt[ing] the
    reasoning and holding . . . of In re Newcomb, 
    483 B.R. 554
    , 558 (Bankr. M.D. Fla. 2012)
    . . . find[ing] the refund is presumably held as TBE by the Debtors and the Trustee has
    failed to rebut this presumption").
    As explained in Newcomb, however, the reasoning behind Morine and
    Kant and their progeny is questionable:
    If creditors other than the IRS were permitted to rely
    on the IRS's authority to allocate a portion of a joint tax
    refund to individual spouses as the basis for rebutting the
    tenancy by the entirety presumption, then a debtor could
    never establish a tenancy by the entirety in a joint tax refund.
    Whether a debtor contributed all (as in Kant and Morine),
    none, or a portion of the overpayment, the joint tax refund
    would always be subject to attack by any creditor of just one
    of the spouses, with the allocation based on 26 U.S.C. §
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    6402(a). Such a result runs contrary to the limitations
    imposed by Sinnreich and to the presumption of entirety
    property afforded by Beal Bank.
    
    Newcomb, 483 B.R. at 558
    .
    We agree. Under Florida law, the Gibsons were entitled to a rebuttable
    presumption that the tax refunds were TBE property. See Beal 
    Bank, 780 So. 2d at 57
    (recognizing that "strong[] policy considerations favor allowing [a] presumption in favor
    of a tenancy by the entireties when a married couple jointly owns personal property").
    They demonstrated their intent to receive the refunds as TBE property by filing
    amended joint tax returns and receiving joint refund checks. Whether the refunds were
    related to Mr. Gibson's economic activity, alone, is irrelevant. See 
    Newcomb, 483 B.R. at 558
    . They then deposited the checks into their joint bank account. In our view, their
    actions created the rebuttable presumption. See § 655.79(1), Fla. Stat. (2014); see also
    Beal 
    Bank, 780 So. 2d at 58
    ("[W]e hold that as between the debtor and a third-party
    creditor (other than the financial institution into which the deposits have been made), if
    the signature card of the account does not expressly disclaim the tenancy by the
    entireties form of ownership, a presumption arises that a bank account titled in the
    names of both spouses is held as a tenancy by the entireties as long as the account is
    established by husband and wife in accordance with the unities of possession, interest,
    title, and time and with right of survivorship."). Wells Fargo failed to rebut the
    presumption.
    Wells Fargo urges us to hew to the decision in Hundley v. Marsh, 
    944 N.E.2d 127
    (Mass. 2011). Wells Fargo's reliance on that case is misplaced. In
    Hundley, the United States Court of Appeals for the First Circuit certified to the Supreme
    Judicial Court of Massachusetts the question of how an income tax refund was to be
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    apportioned between a debtor in bankruptcy and his nondebtor wife with whom he had
    filed a joint tax return. 
    Id. at 129.
    "Hundley dealt with the appropriate formula under
    state law for allocating the ownership of an income tax refund between spouses when
    the applicable state statute was silent on the issue." In re Provencal, 09-42728-MSH,
    
    2011 WL 2470614
    , at *1 (Bankr. D. Mass. June 21, 2011).
    Beal Bank is not silent, as was the status of Massachusetts law in
    Hundley. Thus, Wells Fargo's reliance upon Hundley underscores the trial court's error.
    Despite the TBE presumption established in Beal Bank, the trial court mistakenly
    allowed Wells Fargo, a creditor to only Mr. Gibson, to seek execution on TBE assets by
    claiming an authority reserved exclusively to the IRS. See 
    Sinnreich, 391 F.3d at 1298
    .
    Hundley's analysis began with the observation that "[a]s a matter of Federal law, the
    right to a refund resulting from loss-carryback of prepetition losses constitutes property
    of the estate. Accordingly, any interest that the husband in this case may have in the
    joint refund is properly in the trustee's 
    possession." 944 N.E.2d at 130
    (citations
    omitted). Wells Fargo is not the IRS and lacks the IRS's special authority under the
    Internal Revenue Code. To allow otherwise would be to countenance the evisceration
    of the protections afforded TBE property discussed in Uttermohlen. Thus, Hundley is
    inapposite.
    Conclusion
    We reverse the trial court's entry of summary judgment in favor of Wells
    Fargo and remand for further proceedings consistent with this opinion.
    Reversed and remanded.
    SILBERMAN and SALARIO, JJ., Concur.
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