Dealer Supply Co. v. Greene , 108 N.C. App. 31 ( 1992 )

HEDRICK, Chief Judge.

Defendants argue that the trial court erred in granting plaintiffs motion for summary judgment and in failing to grant their motion for summary judgment due to the fact that the real property at issue herein was held by Ronald and Vicki Greene as tenants by the entirety at the time of the transfer which plaintiff claims was fraudulent. They argue that any proceeds of that transfer were therefore protected from the claims of Ronald Greene’s individual creditors. Plaintiff, however, contends that the separation agreement executed by Ronald and Vicki Greene destroyed the tenancy by the entirety and vested a property interest in Ronald Greene against which plaintiff is entitled to levy.

In North Carolina, it is well established that an individual creditor of either a husband or a wife has no right to levy upon property held by the couple as tenants by the entirety. Gas Co. v. Leggett, 273 N.C. 547, 161 S.E.2d 23 (1968); Hodge v. Hodge, 12 N.C. App. 574, 183 S.E.2d 800, cert. denied, 279 N.C. 726, 184 S.E.2d 884 (1971). It follows therefore that a “[h]usband and wife [can] by joint voluntary conveyance transfer the [entirety held] property to anyone of their choice, free of lien or claim of [one spouse’s] individual creditors.” Gas Co. v. Leggett, 273 N.C. at 553, 161 S.E.2d at 28. Further, as a debtor can only commit a fraudulent conveyance by disposing of property to which a creditor has a legal right to take in satisfaction of his claim, id. at 555, 161 S.E.2d at 29, a husband’s conveyance of his interest in entirety held property cannot come within the prohibition against fraudulent conveyances. Id. at 553, 161 S.E.2d at 28.

The creditor of an individual spouse can, however, levy upon the interest of that individual spouse which exists following the dissolution of the entirety estate. Union Grove Milling and Manufacturing Co. v. Faw, 103 N.C. App. 166, 404 S.E.2d 508 (1991); Branch Banking and Trust Co. v. Wright, 74 N.C. App. 550, 328 S.E.2d 840 (1985). This Court has stated that a tenancy by the entirety can be terminated or destroyed only in certain circumstances:

The tenancy by the entirety may be terminated by a voluntary partition between the husband and the wife whereby they execute a joint instrument conveying the land to themselves as tenants in common or in severalty. But neither party is entitled to a compulsory partition to sever the tenancy.

A divorce a vinculo, an absolute divorce which destroys the unity of husband and wife that is essential to the existence of the tenancy, will convert an estate by the entirety into a tenancy in common. The divorce spouses become equal co-tenants.

A divorce a mensa et thoro, on the other hand, a divorce from bed and board which does not dissolve the marriage relation, does not sever the “unity of persons,” and does not terminate or change the tenancy by the entirety in any way. In this connection, it should be observed that an estate by the entirety is not terminated or dissolved by the acts of the parties which constitute mere grounds for an absolute divorce; there must be a final decree of absolute divorce for this effect to occur.

Bransetter v. Bransetter, 36 N.C. App. 532, 534-35, 245 S.E.2d 87, 89-90 (1978), quoting J. Webster, Real Estate Law in North Carolina, § 116, p. 136 (1971).

Ronald and Vicki Greene were not divorced until 2 November 1987, over eight (8) months following the conveyance of the marital property to Ronald Greene’s parents. We hold that the property therefore remained entirety property at the time of the conveyance and could not be the subject of a conveyance in defraud of Ronald Greene’s individual creditors. The trial court erred in ordering that plaintiff was entitled to receive the proceeds of the sale of this property. As the initial conveyance to George and Christine Greene was a valid conveyance, defendant Patricia Greene is entitled to the full proceeds of any subsequent sale.

Plaintiff argues that the decision by this Court in Riley v. Riley, 86 N.C. App. 636, 359 S.E.2d 252 (1987), requires that we hold that the separation agreement executed by Ronald and Vicki Greene dissolved the tenancy by the entirety prior to the conveyance of the property to Ronald Greene’s parents. We find, however, that Riley is not controlling in this case. In Riley, this Court simply held that the estate of a deceased husband was enti-tied to enforce the terms of the separation agreement against the surviving spouse despite the fact that the husband had died prior to the entry of an absolute divorce between the parties.

Even assuming arguendo that Riley can be read as holding that the language of a separation agreement alone can dissolve a tenancy by the entirety, the language of the separation agreement in the case at hand is far different than that contained in the Riley agreement. In Riley, the parties agreed that the marital residence “was divided into two, individually owned shares.” In the present case, Ronald and Vicki Greene agreed that Ronald Greene would take sole title to all marital property within five days of the execution of the agreement and Vicki Greene would receive a lump sum cash payment. There was no in kind “division” of the entirety property.

The summary judgment in favor of plaintiff is reversed and this cause is remanded to the trial court for entry of summary judgment in favor of defendants.

Reversed and remanded.

Judge Arnold concurs. Judge WELLS concurs in a separate opinion.