Flatrock River Lodge v. Morris Stout and Tonia Sue Stout , 130 N.E.3d 96 ( 2019 )

FILED
Jun 14 2019, 9:28 am
CLERK
Indiana Supreme Court
Court of Appeals
and Tax Court
ATTORNEY FOR APPELLANT ATTORNEY FOR APPELLEES
Patrick C. Badell Jack A. Tandy
Badell & Wilson, P.C. Tandy Law, LLC
Rushville, Indiana Shelbyville, Indiana
IN THE
COURT OF APPEALS OF INDIANA
Flatrock River Lodge, June 14, 2019
Appellant-Plaintiff, Court of Appeals Case No.
18A-CC-1919
v. Appeal from the Rush Circuit
Court
Morris Stout and Tonia Sue The Honorable David E. Northam,
Stout, Judge
Appellees-Defendants. Trial Court Cause No.
70C01-1609-CC-294
Najam, Judge.
Statement of the Case
[1] Flatrock River Lodge (“Flatrock”) appeals the trial court’s order denying
Flatrock’s motion to execute on its judgment lien upon Morris Stout’s interest
in real estate previously owned by Morris and Tonia Stout as joint tenants with
right of survivorship. Flatrock presents a single issue for our review, namely,
whether Morris’ interest in the real estate as a joint tenant was exempt from
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execution on Flatrock’s judgment lien during his lifetime. Tonia counters that
Flatrock’s appeal was moot upon Morris’ death when she became the sole
owner of the real estate. We hold that Flatrock’s appeal is not moot and that
the real estate is not exempt from execution on the judgment lien.
[2] We reverse.
Facts and Procedural History
[3] In 1985, Maurice and Lucille Stout deeded forty-six acres of real estate in Rush
County to their son Morris and their granddaughter Tonia as joint tenants with
right of survivorship (“the real estate”). On September 2, 2016, Flatrock, a
health care provider, filed a complaint on account against Morris seeking
judgment for a balance Morris owed Flatrock in the amount of $39,238.28 plus
attorney’s fees. Flatrock also filed a notice of lis pendens with respect to the real
estate in the Rush County Recorder’s Office. On September 16, Tonia moved
to intervene, and the trial court granted her motion. Thereafter, Flatrock and
Morris entered into an agreed judgment, approved by the trial court on
September 23, whereby judgment was entered against Morris and in favor of
Flatrock in the amount of $40,144.28. The Rush County Clerk entered the
judgment in the record of judgments and orders (“RJO”) on September 27.
[4] On January 18, 2018, Flatrock filed a Trial Rule 69 motion for execution and
foreclosure on the judgment lien. In response, Tonia filed a memorandum
stating that, because she and Morris had acquired title to the real estate as joint
tenants with right of survivorship, their joint interest should be treated like a
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tenancy by the entireties. Thus, Tonia asserted that Morris’ interest in the real
estate was exempt by statute from execution. Following a hearing on March
12, the court denied Flatrock’s motion. Flatrock filed a motion to correct error,
which the court also denied. On August 14, Flatrock filed a notice of appeal.
And on October 14, Morris died. 1
Discussion and Decision
[5] Flatrock contends that the trial court erred when it denied its motion to execute
on the judgment lien. While the trial court did not state a reason for its denial,
the parties agree that the trial court must have concluded that Morris’ interest in
the real estate was exempt by statute from execution. Where, as here, the
relevant facts are not in dispute and the interpretation of a statute is at issue,
such statutory interpretation presents a pure question of law, and our review is
de novo. Clem v. Watts, 27 N.E.3d 789, 791 (Ind. Ct. App. 2015).
[6] We first address Tonia’s contention that, because Morris died in October 2018,
this appeal is moot. Tonia maintains that because she was a joint tenant with
right of survivorship in the real estate, Morris’ interest in the real estate became
hers at his death free and clear of any judgment lien. Tonia would disregard the
fact, however, that Flatrock’s money judgment against Morris became a lien on
Morris’ interest in the real estate when the Rush County Clerk entered the
1
We note that no party has appeared in this appeal as a successor to Morris. Only Flatrock and Tonia have
filed briefs in this matter.
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agreed judgment in the RJO on September 27, 2016, two years before Morris’
death. See Arend v. Etsler, 737 N.E.2d 1173, 1175 (Ind. Ct. App. 2000) (stating
that a money judgment becomes a lien on the debtor’s real property when the
judgment is recorded in the judgment docket in the county where the realty held
by the debtor is located). Thus, Tonia takes Morris’ interest in the real estate
subject to Flatrock’s judgment lien. Jones v. Chandler, 40 Ind. 588, 590 (1872).
The lien was not extinguished at Morris’ death, and this appeal is not moot.
[7] The dispositive issue presented on appeal is whether Indiana Code Section 34-
55-10-2(c)(5) (2018), which provides that “[a]ny interest that the debtor has in
real estate held as a tenant by the entireties” is exempt from execution of a
judgment lien, also exempts from execution an interest in real estate held as a
joint tenant with right of survivorship. Flatrock contends that the trial court
erred when it denied its motion to execute its judgment lien on the real estate.
In particular, Flatrock maintains that, contrary to Tonia’s assertion to the trial
court, subsection 2(c)(5) of the exemption statute does not apply to Morris’ and
Tonia’s interests in the real estate, which they owned as joint tenants with right
of survivorship. We must agree.
[8] In Indiana, and generally, there are three forms of concurrent ownership of real
estate, including joint tenancy, tenancy in common, and tenancy by the
entireties. Powell v. Estate of Powell, 14 N.E.3d 46, 48 (Ind. Ct. App. 2014). A
joint tenancy is a single estate in property owned by two or more persons under
one instrument or act. I.C. § 32-17-2-1; Poulson v. Poulson, 691 N.E.2d 504, 506
(Ind. Ct. App. 1998) (citing 17 I.L.E. Joint Tenancy § 1, p. 60 (1959)). Upon
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the death of any one of the tenants, his share vests in the survivors. Poulson, 691
N.E.2d at 506. When a joint tenancy is created, each tenant acquires an equal
right to share in the enjoyment of the land during their lives. Grathwohl v.
Garrity, 871 N.E.2d 297, 301 (Ind. Ct. App. 2007) (citation omitted). “It is well
settled that a conveyance of his interest by one joint tenant during his lifetime
operates as a severance of the joint tenancy as to the interest so conveyed, and
[it] destroys the right of survivorship in the other joint tenants as to the part so
conveyed.” Morgan v. Catherwood, 95 Ind. App. 266 167 N.E. 618, 622 (1929).
Each joint tenant may sell or mortgage his or her interest in the property to a
third party. Grathwohl, 871 N.E.2d at 301. And the interest of each joint tenant
“is subject to execution.” Thornburg v. Wiggins, 135 Ind. 178, 34 N.E. 999, 1002
(1893).
[9] On the other hand, a tenancy by the entireties exists only between spouses and
is premised on the legal fiction that husband and wife are a single entity.
Underwood v. Bunger, 70 N.E.3d 338, 342 (Ind. 2017).
Once an entireties estate has vested, each spousal tenant
“becomes seized of the entire estate, but neither is seized of any
divisible part thereof.” Kilgore v. Templer, 188 Ind. 675, 682, 125
N.E. 457, 459 (1919). Thus, an entireties estate cannot be
severed by the unilateral action of one of the tenants. Neither
spouse has a separable interest in property held by such a
tenancy, so a conveyance by just one tenant is insufficient to pass
legal title. Pension Fund of Disciples of Christ v. Gulley, 226 Ind.
415, 419, 81 N.E.2d 676, 678 (1948). An essential trait of this
tenancy is that it “devolves upon the surviving spouse the
ownership of the property in real estate, free and clear of the
individual indebtedness of the other spouse.” Whitlock v. Public
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Service Co. of Ind., 239 Ind. 680, 159 N.E.2d 280, 284 (1959).
When one spouse dies, the survivor, “being already seized of the
whole, can acquire no new or additional interest” due to the
survivorship. Kilgore, 188 Ind. at 682, 125 N.E. at 459. Rather,
the survivor “holds the entire estate, not by virtue of any right
which he acquires as survivor, but by virtue of the original
grant.” Id. (citation omitted).
Id. at 342-43.
[10] As our Supreme Court explained in 1871,
[t]he same difference which existed at common law between joint
tenants and tenants by entireties continues to exist under our
statute. In both, the title and estate are joint, and each has the
quality of survivorship, but the marked difference between the
two consists in this: that in a joint tenancy, either tenant may
convey his share to a co-tenant, or even to a stranger, who
thereby becomes tenant in common with the other co-tenant;
while neither tenant by the entirety can convey his or her interest
so as to affect their joint use of the property during their joint
lives, or to defeat the right of survivorship upon the death of
either of the co-tenants; and there may be a partition between
joint tenants, while there can be none between tenants by
entireties. See sec. 1 of “an act concerning the partition of lands,”
2 G. & H. 361.
Chandler v. Cheney, 37 Ind. 391, 396-97 (Ind. 1871).
[11] Tonia asserts broadly and without qualification that “the law is clear that jointly
held property is exempt from execution.” Appellant’s App. Vol II at 19. Thus,
she asks that we apply subsection 2(c)(5) of the exemption statute, which refers
only to an interest held as a tenant by the entireties, to the interest she and
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Morris held “as joint tenants with the right of survivorship.” In so doing, she
equates the two tenancies. Tonia reasons that “[to] allow Flatrock to force a
sale of the real estate would violate and frustrate the intent” of her
grandparents. Appellee’s Br. at 9. But it is not the subjective intent of the
grantors which controls the operation and effect of the instrument of
conveyance. The phrase “joint tenants with the right of survivorship,” which
appears in the deed from Tonia’s grandparents, is a term of art with a distinct
meaning in the common law which has not been altered by statute. Appellant’s
App. Vol. II at 21.
[12] The goal of statutory interpretation is to discern and further the intent of the
legislature. West v. Off. of Ind. Sec’y of State, 54 N.E.3d 349, 353 (Ind. 2016).
When a statute is clear and unambiguous, we need not apply any rules of
construction other than to require that the words and phrases be taken in their
plain, ordinary, and usual sense. Clem, 27 N.E.3d at 791. Clear and
unambiguous statutes leave no room for judicial construction. Id. And, in any
case, we exercise caution so as not to add words or restrictions where none
exist. West, 54 N.E.3d at 353.
[13] Subsection 2(c)(5) of the exemption statute clearly and unambiguously applies
only to a tenancy by the entireties. I.C. § 34-55-10-2(c)(5). We decline Tonia’s
invitation to read words into the statute that are not there, and we hold that
subsection 2(c)(5) does not exempt from execution interests held in a joint
tenancy with right of survivorship. Indeed, the differences between a tenancy
by the entireties and a joint tenancy with right of survivorship are clear and
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well-established. In a tenancy by the entireties, one spouse may not unilaterally
convey or mortgage his interest to a third party. See Estate of Grund v. Grund,
648 N.E.2d 1182, 1185 (Ind. Ct. App. 1995), trans. denied. And an estate by the
entireties is immune to seizure for the satisfaction of the individual debt of
either spouse. Eilts v. Moore, 117 Ind. App. 27, 68 N.E.2d 795, 796 (1946).
[14] In contrast, a joint tenant may alienate his interest in real estate or his interest
may be alienated by another. As we have noted, a joint tenant may sell or
mortgage his interest to a third party, and his interest is subject to execution by
a judgment lien creditor. Grathwohl, 871 N.E.2d at 301; Thornburg, 34 N.E. at
1002. Had the legislature intended to exempt from execution real estate owned
as joint tenants with right of survivorship it would have done so. We hold that
the trial court erred when it denied Flatrock’s motion to execute on its
judgment lien.
[15] In sum, Flatrock’s judgment lien against Morris was a valid and subsisting lien
upon his interest in the real estate, which he owned with Tonia as joint tenants
with right of survivorship. The judgment lien was not extinguished when
Morris died. As the surviving joint tenant, Tonia acquired Morris’ interest in
the real estate by operation of law, subject to the lien. The lien is subject to
execution and judicial foreclosure in the manner provided under Trial Rule 69.
And, if another party is the purchaser of Morris’ interest at an execution sale,
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Tonia and the purchaser will each own an undivided interest as tenants in
common. 2 See Chandler, 37 Ind. at 397.
[16] Reversed.
Pyle, J., and Altice, J., concur.
2
“Four requisites must exist to constitute a joint tenancy[.]” Richardson v. Richardson, 121 Ind. App. 523, 98
N.E.2d 190, 192-93 (1951) (citation omitted). “First[, t]he tenants must have one and the same interest.
Second[, t]he interests must accrue by one and the same conveyance. Third[, t]he interests must commence
at one and the same time. Fourth[, i]t must be held by one and the same undivided possession.” Id. at 193
(citation omitted). Here, upon a sale of Morris’ interest in the real estate, the second and third elements will
not exist.
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