[PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT FILED
________________________ U.S. COURT OF APPEALS
ELEVENTH CIRCUIT
November 30, 2004
No. 04-10309
THOMAS K. KAHN
________________________ CLERK
D. C. Docket No. 03-02239-CV-T-24-TBM
BKCY No. 02-17020-8B7
In Re: SIMON SINNREICH,
Debtor.
__________________________________________________________________
FRANK MUSOLINO,
Plaintiff-Appellant,
versus
SIMON SINNREICH,
Defendant-Appellee.
________________________
Appeal from the United States District Court
for the Middle District of Florida
_________________________
(November 30, 2004)
Before BLACK, RONEY and ALARCÓN*, Circuit Judges.
RONEY, Circuit Judge:
In this case of first impression in this Circuit, we hold that property owned by
a Chapter 13 bankruptcy debtor as tenancy by the entireties with a non-debtor under
Florida law is not part of the bankruptcy estate and therefore cannot be reached by
creditors. Provided that the property meets all requirements as a tenancy by the
entireties under applicable law, it is exempt from bankruptcy administration under
Section 522(b)(2)(B) of the Bankruptcy Code. Debtor Simon Sinnreich filed a
Chapter 13 petition for bankruptcy relief, claiming that certain real estate property
and household goods and furnishings held with his non-debtor wife as tenants by the
entireties under Florida law was exempt from his creditors pursuant to 11 U.S.C. §
522(b). Frank Musolino, one of Sinnreich’s creditors, objected to this claimed
exemption. The bankruptcy court denied Musolino’s objection. The district court
affirmed that decision in a grant of partial summary judgment for the debtor
Sinnreich. We affirm.
Section 541(a) of the Bankruptcy Code provides that all of the debtor’s interest
in the property owned at the time of the filing of a bankruptcy petition becomes
*
Honorable Arthur L. Alarcon, United States Circuit Judge for the Ninth Circuit, istting
by designation.
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property of the bankruptcy estate. See 11 U.S.C. § 541(a). Section 522 of the
Bankruptcy Code, however, exempts from the bankruptcy estate
any interest in property in which the debtor had,
immediately before the commencement of the case, an
interest as a tenant by the entirety or joint tenant to the
extent that such interest as a tenant by the entirety or joint
tenant is exempt from process under applicable
nonbankruptcy law.
11 U.S.C. § 522(b)(2)(B). Section 522 therefore permits the exempted interest in
property to be returned to the debtor free of administration by the trustee.
The nature of a bankrupt’s interest in property is determined by state law. See
Butner v. United States, 440 U.S. 48, 55 (1979). The Supreme Court of Florida has
explained 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. . . . [W]hen 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
of one spouse alone, and therefore it cannot be reached to
satisfy the obligation of only one spouse.
Beal Bank SSB v. Almand & Assoc., 780 So. 2d 45, 53 (Fla. 2001) (internal citations
omitted).
Despite the clarity of both Florida law and the exemption provided in the
Bankruptcy Code, the creditor, Musolino, argues that “we need go no further” than
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United States v. Craft, 535 U.S. 274 (2002) to bring certain individualized ownership
rights of Sinnreich with respect to that property into the bankruptcy administration.
The Supreme Court in Craft held that the Internal Revenue Service has the
authority to divide tenancy by the entireties property to satisfy the tax obligation of
one spouse. 535 U.S. at 288-89. We reject Musolino’s argument that Craft’s
holding, based on the unique powers granted to the IRS under federal law, can be
extended to permit creditors in bankruptcy cases to enjoy the same authority the IRS
has to divide the property rights of tenancy by the entireties property.
In Craft, the respondent’s husband failed to file income tax returns, resulting
in the IRS attaching a federal tax lien to “‘all property and rights to the property,
whether real or personal, belonging’ to him.” 535 U.S. at 276. The respondent
argued that the lien could not attach to any property held by her and her taxpayer
husband in tenancy by the entireties because, under Michigan law, the entirety
property rights could neither “easily be severed unilaterally” nor encumbered without
mutual consent of the husband and wife. 535 U.S. at 281. The Court first restated
the common idiom that describes ownership of property as a “bundle of sticks” with
each individual property right represented by a different stick. 535 U.S. at 278. The
Court explained that this bundle of sticks contains several different individual rights,
such as, in the tenancy by the entireties ownership regime under Michigan law, the
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individual right for each spouse to use the property, exclude third parties from it, and
receive equal share of the income produced by it. 535 U.S. at 282. It further
explained that, under Michigan law, neither spouse may unilaterally alienate or
encumber the property.
The Supreme Court then examined the IRS’s powers granted by 26 U.S.C. §
6321 to determine if the IRS may pull any of the individual right “sticks” that a
defaulted taxpayer may have out of the idiomatic bundle in order to encumber
property owed with a spouse by the entireties. The Court determined that the IRS’s
power to attach a lien on all “property and rights to property” of any individual who
failed to pay federal taxes was broad, clearly authorizing the IRS to attach a lien to
all property and rights to the property a taxpayer may have, despite state law
prohibiting otherwise. 535 U.S. at 288. The Court reasoned that the IRS’s power to
attach tax liens under § 6321 superceded any exemptions state law may afford a
debtor, explaining that the “Supremacy Clause provides the underpinning for the
Federal Government’s right to sweep aside state-created exemptions.” 535 U.S. at
288-89 (internal citations and quotations omitted). As such, the Court held that the
IRS’s statutory authority permitted it to attach a lien to the respondent’s property
owned as tenancy by the entireties with her defaulted taxpayer husband. Simply
stated, the Craft Court announced the rule that the IRS’s federal statutory powers to
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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, which is evidenced by its careful and thorough analysis of
the powers of the IRS to attach a lien on all “property and rights to property” of any
taxpayer who failed to pay federal taxes as set forth in 26 U.S.C. § 6321. 535 U.S.
at 288. The Supreme Court has expressed its “deep reluctance to interpret a statutory
provision so as to render superfluous other provisions in the same enactment.”
Circuit City Stores, Inc. v. Adams, 532 U.S. 105, 113 (2001) (internal quotation and
citation omitted). To extend to bankruptcy creditors Craft’s holding that the statutory
powers of the IRS enumerated in 26 U.S.C. § 6321 permitted it to attach a lien to
property rights held in tenancy by the entireties, despite state law, would
impermissibly render § 522(b)(2)(B) of the Bankruptcy Code superfluous.
Although neither the parties nor this Court has identified any circuit court of
appeals precedent on this precise issue, several bankruptcy courts have rejected
Musolino’s argument. See In re Greathouse, 295 B.R. 562, 567-68 (Bankr. D. Md.
2003) (declining to extend holding in Craft, holding that under Maryland law
property held in tenancy by entireties estate is validly exempt from bankruptcy
creditors of one spouse under § 522(b)(2)(B)); In re Kelly, 289 B.R. 38, 45 (Bankr.
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D. Del. 2003) (concluding that Craft is inapplicable, holding that “[u]nder Delaware
law and [§ 522(b)(2)(B)], property held in an entireties estate is validly exempt and
may not be reached by the creditors of one spouse”); see also Schlossberg v. Barney,
380 F.3d 174, 182 (4th Cir. 2004) (declining to extend Craft, holding that Chapter 7
bankruptcy trustee proceeding pursuant to § 544 of the Bankruptcy Code cannot stand
in shoes of the IRS in a tax collection context in order to reach property held in
tenancy by the entireties exempted under § 522(b)(2)(B)); In re Ryan, 282 B.R. 742,
750 (Bankr. D. R.I. 2002) (noting that “Craft gives no indication that the reasoning
therein should be extended beyond federal tax law”).
The Florida Supreme Court in Beal Bank identified six characteristics of
property that is held as tenancy by the entireties: (1) unity of possession (joint
ownership and control); (2) unity of interest; (3) unity of title; (4) unity of time; (5)
survivorship; and (6) unity of marriage. 780 So. 2d at 52. It is undisputed that the
ownership of the property involved here has these characteristics, and that it “is
exempt from process under applicable nonbankruptcy law.” § 522(b)(2)(B).
There is simply no support for the argument that Sinnreich nonetheless has
individualized ownership rights with respect to that property that became part of the
bankruptcy estate as defined in § 541 of the Bankruptcy Code. The district court’s
grant of partial summary judgment to Sinnreich, affirming the bankruptcy court’s
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decision to permit property held as tenants by the entireties by Sinnreich and his wife
to fit within the exemption set forth in § 522(b)(2)(B) of the Bankruptcy Code, is
AFFIRMED.
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