Matthew Peet v. James Checkett

United States Court of Appeals
For the Eighth Circuit
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No. 15-2040
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In re: Matthew Richard Peet; Marilynn Louise Peet
lllllllllllllllllllllDebtors
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Matthew Richard Peet; Marilynn Louise Peet
lllllllllllllllllllllAppellants
v.
James Kevin Checkett
lllllllllllllllllllllAppellee
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National Association of Consumer Bankruptcy Attorneys
lllllllllllllllllllllAmicus on Behalf of Appellant(s)
National Association of Bankruptcy Trustees
lllllllllllllllllllllAmicus on Behalf of Appellee(s)
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Appeal from the United States Bankruptcy
Appellate Panel for the Eighth Circuit
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Submitted: February 10, 2016
Filed: April 27, 2016
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Before RILEY, Chief Judge, LOKEN and BENTON, Circuit Judges.
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BENTON, Circuit Judge.
Matthew Richard Peet and Marilynn Louise Peet held title to real property as
joint tenants with Marilynn’s parents. Marilynn and her father also owned a Ford
pickup as joint tenants. The Peets filed for bankruptcy under Chapter 13, later
converting to Chapter 7. See 11 U.S.C. § 1307(a). After the conversion, Marilynn’s
parents died. The Trustee then notified the Peets he intended to sell the real estate
and pickup, maintaining that the right of survivorship made the bankruptcy estate the
sole owner. Agreeing, the bankruptcy court ruled that the joint tenancies remained
intact through creation of the bankruptcy estate and allowed the sale. The Bankruptcy
Appellate Panel affirmed. In re Peet, 529 B.R. 718 (B.A.P. 8th Cir. 2015).
The Peets challenge the sale of the real property and pickup, arguing their joint
tenancies became tenancies in common, with no right of survivorship. Thus, they
claim, the death of Marilynn’s parents did not change the estate’s share of the
property. This court sits as a “second court of review in bankruptcy matters,”
reviewing interpretations of law de novo and factual findings for clear error.
Advanced Control Solutions, Inc. v. Justice, 639 F.3d 838, 840 (8th Cir. 2011).
Having jurisdiction under 28 U.S.C. § 158(d)(1), this court affirms.
When the Peets filed for bankruptcy under Chapter 13, they owned a joint
tenancy with right of survivorship in the real property, and Marilynn owned a joint
tenancy with right of survivorship in the pickup. In Missouri, a joint tenancy is
“based on the theory that the tenants share one undivided estate, with the distinctive
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characteristic of the right of survivorship.” Remax of Blue Springs v. Vajda & Co.,
708 S.W.2d 804, 806 (Mo. App. 1986). The essential elements of a joint tenancy are
the four unities of interest, title, time, and possession. In re Estate of Gerling, 303
S.W.2d 915, 917 (Mo. 1957). Each joint tenant must have one and the same interest;
the interests must be conveyed by the same title; the interests must commence at the
same time; and each joint tenant has the right to possess the property. In re
Robinson, 791 S.W.2d 844, 848 (Mo. App. 1990). Severing any of the four unities
destroys a joint tenancy. The remaining tenants become tenants in common, with no
right of survivorship. Johnson v. Woodard, 356 S.W.2d 526, 528 (Mo. App. 1962).
According to the Peets, filing bankruptcy severs the unities of time and title,
turning joint tenancies into tenancies in common. The Peets rely heavily on an
introductory sentence in a recent Supreme Court decision: “When a debtor files a
Chapter 7 petition, his assets, with specified exemptions, are immediately transferred
to a bankruptcy estate.” Harris v. Viegelahn, 135 S. Ct. 1829, 1835 (2015)
(emphasis added). The Court was not presented with the issue here, and the
descriptive sentence does not suggest that “immediately transferred” means a
severance sufficient to destroy the unities of time and title.
Section 541 of the Bankruptcy Code states that filing a bankruptcy petition
“creates an estate. . . . comprised of . . . all legal or equitable interests of the debtor
in property as of the commencement of the case.” 11 U.S.C. § 541(a)(1). This
starkly contrasts with Section 541’s predecessor—Section 70a of the Bankruptcy
Act—which said that upon the filing of a bankruptcy petition, “the trustee . . . shall
. . . be vested by operation of law with the title of the bankrupt. . . .” Bankruptcy Act
of 1898, 30 Stat. 544, 565 at § 70(a). By eliminating the vesting language, Section
541 “eliminates any unnecessary, avoidable dependence on nonbankruptcy law.”
5 Collier on Bankruptcy § 541.LH at 541-135 (16th ed. 2016). Accordingly, state
law determines only a debtor’s legal interest in property up to the moment the
bankruptcy petition is filed; state law does not limit the transferability of that interest
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to the bankruptcy estate. See id. at 541-135-36 (“[U]nlike the requirement of the
Section 70a(5) of the Bankruptcy Act, it is not necessary under the Code to further
determine whether nonbankruptcy law permits the debtor to transfer the
property. . . .”). Cf. Butner v. United States, 440 U.S. 48, 54-55 (1979) (finding that
the bankruptcy court was required to abide by a state law that—because of a pre-
bankruptcy act—gave property rights to a mortgagee instead of the bankruptcy
trustee).
Under Chapter 7, assets remain in the debtors’ name until the trustee disposes
of the property. See Maniez v. Citibank, F.S.B., 937 N.E.2d 237, 251 (Ill. App. 2010)
(holding that in a Chapter 7 bankruptcy, a conveyance “does not occur until the
trustee sells or otherwise disposes of the property and title passes”); In re DeMarco,
114 B.R. 121, 127 (Bankr. N.D. W. Va. 1990) (“There must be some affirmative
action taken by the trustee to break the unities of time, title, interest, and possession
to destroy the joint tenancy.”); In re Spain, 55 B.R. 849, 854 (Bankr. N.D. Ala. 1985)
(“The debtor does not transfer his title to 541 property of the estate but holds his title
subject to the exercise by the trustee of his rights to sell, use or lease such property
by appropriation. . . .”). But see In re Chadwick, 113 B.R. 540, 543 (Bankr. W.D.
Mo. 1990) (holding that filing bankruptcy severs a joint tenancy). Nothing in
Missouri law suggests otherwise. Cf. Renard v. Butler, 30 S.W.2d 608, 609 (Mo.
1930) (holding that trustees in bankruptcy are not “persons interested as joint tenants,
tenants in common, or coparceners” under the state partition statute).
Because the bankruptcy estate included the joint tenancies, the Bankruptcy
Appellate Panel did not err in affirming the sale of the real property and pickup.
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The judgment is affirmed.
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