Month: May 2016

Can wife’s student loan be considered marital debt in a Virginia divorce?

Yes, according to Dyne v. Dyne, decided by the Roanoke County Circuit Court in the Commonwealth of Virginia, a student loan incurred during the marriage and before the separation for the benefit of both parties can be considered joint marital debt for purposes of the allocation of debt in equitable distribution.  In addition, the Virginia divorce court judge held that wife’s payments of the mortgage for the marital residence until it could be sold would be equally distributed along with the small profit from the sale of the home, husband’s share in the form of a small credit against his large debt to wife.  Had wife allowed the house to go to a foreclosure auction resulting in a large deficiency, the parties may have been left with few options other than bankruptcy to discharge the debt.

In Dyne, the wife argued her educational loans of $12,117.11 to become qualified to teach school in Virginia should be considered marital debts to be split with the husband.  She claimed she incurred theses loans after the parties agreed that her future income as a teacher would provide a stable income and retirement benefits for the family.

Relying on the standards enunciated by the Supreme Court of Virginia in Gilliam v. McGrady, Record No. 090958 (April 15, 2010), discussed herein in answer to the question, “Is debt incurred during the marriage presumed to be marital debt?”, the divorce court judge found that the wife, as the party seeking distribution of the debt, had met her burden to prove the debts incurred in her individual name were in fact hybrid debts.  In this case, the Court determined the educational debts were part marital and part separate debt: the wife had borrowed a portion of the money ($2,815.46) following the parties’ separation, but the remainder of the debt ($9,301.65) had been incurred during the marriage with the consent of both parties.  Thus, the Court ruled that the debt acquired prior to the separation was considered marital debt to be split between the husband and wife.

In addition to the educational loan distribution, the Virginia Circuit Court ruled on the debts related to the marital residence.  While married, the husband had been abusive to his wife, making repeated threats to kill himself or his wife and child.  As his behavior continued to escalate, the wife sought divorce and obtained an injunction requiring her husband to vacate the marital residence.  The husband blatantly defied the order, changed the door locks, and placed all of the furniture in storage, making it uninhabitable for the wife and child. Because the wife and child could not live in the martial residence, they resided for two years in a furnished apartment.  While living in the apartment, the wife alone continued to make payments on the marital home without any contribution from the husband, borrowing $23, 679.16 to remain current on the mortgage, utilities, and repairs.  Later, the house sold for a profit of only $929.47, which was held in escrow.

The husband alleged he should not have to share these expenses and claimed that the wife and child could have lived in the premises.  Furthermore, he contended that he should be paid one-half the rental value of the house while it remained vacant.  The divorce court judge refused to consider these arguments.  The wife argued that the debts should be shared, because the husband knew that he had forced the property to become uninhabitable, and her payments for the continued upkeep of the house allowed it to sell at a profit.

Considering the factors of Virginia Code §20-107.3(E), the Court held that the sale proceeds and the marital debts should be divided equally.  The Court also held that all of the real estate proceeds should be paid to the wife, and the husband would be granted a credit of $464.73 against the debt, leaving the balance to be paid to the wife at $15,936.05.

You should consult with your Virginia divorce lawyer to discuss how your debts may be treated in equitable distribution.

Must a divorcing husband and wife share the deficiency from a foreclosure sale of the marital residence in Virginia?

Yes, in the case of Austin v. Austin (Case No. CL08-1673, June 21, 2010), the Roanoke County Circuit Court found that the parties incurred the debt jointly, and, thus, the deficiency debt from the sale of the former marital residence was marital debt and should be divided equally.  In addition, as the wife had earning ability that her husband did not, and Court ruled the wife should pay spousal support to the husband.  The court also stated, given the amount of marital debt, that “[b]ankruptcy appears to be a consideration for each of them.”  The Austin case stands in contrast to the Reidy case discussed earlier, where the Loudoun County Circuit Court refused to equitably divide marital debt resulting from an overmortgaged house, as discussed in answer to the question, “ Would a Virginia divorce court order a couple to allow the former marital residence to go to foreclosure?”.

In Austin, the husband and wife were married in Virginia for seventeen years before separating.  Ten years into the marriage, the husband began suffering serious health problems, including kidney and heart problems.  Shortly before the divorce, the husband was completely disabled, living on spousal support, Social Security, Medicare, and gifts from his family.  He sought a no-fault divorce, spousal support, and a monetary award under Virginia’s equitable distribution section, Virginia Code § 20-107.3, arguing that the wife had squandered money for her own purposes, placing him in an economic hardship because she continued to borrow money against their jointly owned home during the marriage to pay off her separate credit card debts.  Under Virginia Code §20-107.3, the Virginia Circuit Court judge has the power, upon granting a divorce, to make a monetary award to one party from the other for the purpose of creating an equitable distribution of the marital assets.  Under the husband’s interpretation of the facts, he alleged he was entitled to the receipt of this award, because his family had placed significant equity in the marital home, and, due to the wife’s irresponsibility, he lost his potential share of the profit from their home.

The wife’s testimony, however, presented a different story.  She claimed the parties never pooled their income. While her husband paid half of the house note and some food expenses, she bought most of the household furnishings, clothing, vacations, and the swimming pools installed at both their first and second homes—purchases made on her credits cards, because her husband had bad credit. Moreover, she contended that her husband wasted his money on alcohol and crack cocaine, and his habits exacerbated his medical conditions and contributed to his body’s rejection of a donated kidney.

Upon examination of the parties’ testimonies, the Court found that both husband and wife spent beyond their means, jointly and separately, throughout the marriage.  The divorce judge found that the standard of living established during the marriage was beyond the parties’ economic means.  The wife was employed as a social worker in her brother’s business supporting disabled individuals, and in that position, she earned only about $48,000 per year when the parties separated. Following the marriage, the wife has incurred $60,000 in unsecured debt, and the husband has a debt of approximately $25,000, making them both candidates for filing for bankruptcy.   The court noted that bankruptcy appeared to be a consideration for both parties.

The Court in Austin v. Austin also ruled on the issue of spousal support, finding that the wife owed the husband monthly support.  Although the each of the parties alleged that the other had committed adultery, the claims were not proved.  The Virginia Circuit Court judge, however, ordered support for the husband because he lived on income from his disability without any earning potential, while the wife had a college education, earned a decent living wage, and was in good physical condition.  Moreover, because of both parties’ excessive spending, the Court, after considering the equities established in Virginia Code §20-107.1 (E) determined an appropriate budget and found the wife had the ability to pay support for her husband.

You should consult with your Virginia bankruptcy and divorce lawyer concerning whether a mortgage deficiency should be divided between the parties.

Is a purported settlement agreement signed by the parties’ attorneys but not by the parties themselves binding in a Virginia divorce proceeding?

No.  In Jordan v. Jordan, Civil Action: CL09000213-00, the Hanover County Circuit Court ruled that Virginia Code §20-149 required that such agreements must “be in writing and signed by both parties” and that the plain meaning of the statutory language should apply.

In Jordan, the husband argued that the agreement should be considered invalid under Va. Code §20-155 and §20-149.  While Va. Code §20-150 allows for parties to create such agreements in order to properly distribute assets upon a marital dissolution, Virginia Code §20-149 stipulates that these agreements must “be in writing and signed by both parties.”  In Virginia Code §20-155, however, the statute states, “If the terms of such agreement are (i) contained in a court order endorsed by counsel or the parties or (ii) recorded and transcribed by a court reporter and affirmed by the parties on the record personally, the agreement is not required to be in writing and is considered to be executed.”   The consequences of this particular code section are explored in more detail in to the “Authorized Case Study: Contempt of Court” post in this blawg.  Because the appellate courts of the Commonwealth of Virginia had not ruled on the issue of whether an attorney’s signature would suffice in the place of a client’s signature on a settlement agreement, Jordan involved a case of first impression before the Hanover County Circuit Court, and this issue of statutory interpretation became the deciding factor in the court’s analysis.

Both the husband and wife in Jordan did not dispute that the agreement had not been read into the record nor had a mutually endorsed court order been presented.  However, the parties’ attorneys had signed a “term sheet,” a loose accumulation of the attorneys’ negotiations of the equitable distribution of the assets and the terms of spousal support. Relying upon the Court of Appeals’ decision in Gaffney v. Gaffney, 45 Va. App. 655, 613 S.E.2d 471 (2005), the Hanover County Circuit Court judge agreed that the General Assembly intended to use Va. Code §20-155 to displace the common law principles of agency that would have endowed the agent with the authority of the principal. Based on the language of Watkins v. Hall, 161 Va. 924, 930, 172 S.E. 445, 447 (1934) see also Barr v. Town & Country Properties, 240 Va. 292, 295, 396 S.E. 2d 672, 274 (1990), the Court determined that the plain language of the statute should serve as binding on the court, and the official procedures of the Code Section meant the clients’ attorneys could not sign the agreement and have it be enforceable against the parties in this case.

You should consult with your Virginia divorce lawyer concerning whether any alleged agreement may be binding upon you.

 

Can an ex-wife enforce an affidavit of support against her debtor ex-husband in bankruptcy court after the state divorce court has already terminated spousal support?

No, the United States Bankruptcy Appellate Panel, of the First Circuit ruled in the case of  In re Schwartz, Bankrupty No. 06-13696 WCH (August 26, 2008), an appeal from the United States Bankruptcy Court for the District of Massachusetts. The Appellant ex-wife, who was a citizen of Israel, and the Appellee ex-husband had been married in 1996. In order to obtain permanent resident status for his foreign-born wife, the husband filed the required Form I-864 Affidavit of Support (“Affidavit of Support”), with what was then the Immigration and Naturalization Service (now the United States Citizenship and Immigration Service under the Department of Homeland Security) as his wife’s sponsor, promising to support his wife at a level above 125% of the federal poverty guidelines, and to reimburse the government should she ever fall below that level and become a public charge, subject to termination upon certain conditions, not including divorce. On January 6, 2003, the wife filed for divorce from the husband in Oklahoma state divorce court. On December 18, 2003, the Oklahoma State Court issued a Decree of Divorce allocating the assets and liabilities of the parties and terminating the husband’s obligation to support the wife as of June 1, 2004.

In Schwartz, the wife made a motion for reconsideration of prior order dismissing her adversary proceeding to enforce the Chapter 7 debtor ex-husband’s support affidavit and for a determination that his obligations thereunder were nondischargeable.   The bankruptcy court judge had dismissed the adversary proceeding for lack of subject matter jurisdiction.  On appeal, the United States Bankruptcy Appellate Panel ruled that the Bankruptcy court did not err by dismissing the proceeding, where ex-wife’s (Appellant’s) cause of action was barred by Rooker-Feldman doctrine or by res judicata effect of state divorce court’s prior judgment. Furthermore, ex-wife presented no newly discovered evidence, but simply sought to rehash prior arguments. 11 U.S.C.A. § 523(a)(5);   Fed.Rules Civ.Proc.Rule 59(e);  28 U.S.C.A 1334.

If the Affidavit of Support had been considered by the state divorce court judge in rendering its decision to terminate support, then the wife’s claim in bankruptcy court was barred by the Rooker-Feldman  doctrine, which prohibits lower federal courts, including the United States Bankruptcy Courts, from reviewing final state court judgments.  On the other hand, if the Affidavit of Support had not been submitted in the divorce proceedings, the wife’s claim was nevertheless barred under the doctrine of res judicata , which “prohibits all parties and their privies from relitigating issues which were raised or could have been raised in a previous action, once a court has entered a final judgment on the merits in the previous action.” The First Circuit Bankruptcy Appellate Court affirmed the bankruptcy court’s dismissal on reliance on the Rooker-Feldman doctrine (Rooker v. Fidelity Trust Co. (1923) 263 U.S. 413 (Van Devanter) ; D.C. Court of Appeals v. Feldman, 460 U.S. 462 (1983).

You should consult with your Virginia bankruptcy or divorce lawyer concerning the possible application of the Rooker-Feldman doctrine to your contemplated litigation of family law matters in bankruptcy court.

Can an individual Chapter 13 bankruptcy debtor strip off a second mortgage on nonresidential property owned by the debtor and his wife as tenants by the entireties?

Not in the case of In re Hunter, 284 B.R. 806 (Bkrtcy.E.D.Va.,2002), where the United States Bankruptcy Court for the Eastern District of Virginia ruled that Chapter 13 debtor could not strip off a wholly unsecured, second-priority mortgage lien on non-residential real property owned by debtor and his nondebtor wife as tenants by the entireties.

In Hunter, the debtor filed an individual Chapter 13 petition in bankruptcy court and his wife did not join in the petition or file her own. Prior to confirmation of the plan, the debtor filed an adversary proceeding against creditor, seeking to avoid the second priority mortgage lien under 11 U.S.C. § 506(d) on real property in Pennsylvania that was not the marital residence.  The bankruptcy court judge addressed whether an individual debtor may avoid a lien, whether partially or wholly unsecured, on tenants by the entireties property, without his or her spouse. The court found no Fourth Circuit Court of Appeals precedent relating to either stripping off wholly unsecured mortgage liens in Chapter 13 or stripping off or stripping down undersecured mortgage liens on a debtor’s real property that is not the debtor’s primary residence.  The bankruptcy judge reviewed Pennsylvania’s law, where the subject real property was located, on tenancies by the entirety and found no basis for such relief.  Under Pennsylvania law, just as in Virginia, property held as tenants by the entireties is owned per tout et non per my, that is, each holds an undivided and indivisible interest in the entire property; neither spouse may unilaterally sever an estate held in the entireties.  A tenancy by the entireties is based on the legal fiction that a husband and wife are a single legal person.  As discussed in answer to the question, “Is my Virginia real estate vulnerable to creditors when I divorce?”, a tenancy by the entireties has a number of advantages over a tenancy in common for a married couple, including the right of survivorship, protection from creditors of one spouse alone, and the inability of either spouse to convey his or her interest without joinder of the other spouse.

In Hunter, the Bankruptcy Code provisions did not expressly support the debtor husband’s position, as noted by the Court:  “The only provision permitting the severance of an entireties estate or a unilateral action by one co-tenant is Bankruptcy Code Section 363(h). This provision expressly provides that the “trustee may sell both the estate’s interest” and the co-owner’s interest. There is no authority for the debtor to sell the property under § 363(h). See, Hartford Underwriters Ins. Co. v. Union Planters Bank, N.A, 530 U.S. 1, 7, 120 S.Ct. 1942, 1947, 147 L.Ed.2d 1 (2000). Such a unilateral action is contrary to the essence of the tenants by the entireties estate and should not be permitted absent clear legislative authority.”

The court noted that the debtor sought to provide his spouse with the benefit of having filed bankruptcy without her having borne the burden of a bankruptcy filing.  The Debtor husband sought severance of a portion of the entireties estate when his wife’s interest was in the whole of the property, per tout et non per my, and Pennsylvania law envisioned neither such a division of a tenancy by the entireties estate nor the unilateral severance of any portion of the entireties estate.

You should consult with a Virginia bankruptcy attorney regarding how your interest in tenants by the entirety property will be treated in bankruptcy.

Can attorney’s fees be considered a domestic support obligation in bankruptcy?

Yes, in the case of In re Uzaldin, 418 B.R. 166 (Bnkr. E.D.Va. 2009), where the United States Bankruptcy Court for the Eastern District of Virginia ruled that the prepetition final divorce decree’s award of attorneys fees to debtor’s former spouse was a domestic support obligation because the fees were awarded as part of the parties’ divorce litigation which included issues of child custody, spousal support, child support, and property settlement. See 11 U.S.C.A. § 101(14A) . This classification is important because domestic support obligations are entitled to priority status, are nondischargeable in every type of bankruptcy, and must be paid in full under a Chapter 13 plan. In contrast, property settlement and equitable distribution debts do not have priority, may be dischargeable in a Chapter 13 case (but not usually in a Chapter 7 case), and need not be paid in full in a Chapter 13 plan. See 11 U.S.C.A. § 507(a)(1) .

In Uzaldin, the litigation arose out of the Debtor’s objection to the classification, but not amount, of the proof of claim filed by the Debtor’s ex-wife.   Notable in the divorce case had been the judge’s finding of marital waste by the Debtor through the transfer of assets to his mother and his voluntary underemployment.   The Debtor had allowed the marital residence to go to foreclosure with a loss of nearly $200,000 in equity.  The proof of claim consisted of $195,000 in equitable distribution for equity in the home, $30,000 in attorney’s fees and an offset of $5,500 for the wife’s share of a marital debt.  The judge ruled that the nature of attorney’s fees follows from the nature of the principal award.  There was no evidence that permitted the court to apportion the attorney’s fees between the custody, spousal support, and child support issues and the equitable distribution issues.    The bankruptcy judge ruled that where the Debtor presents no evidence on the nature of the attorney’s fees, then the former spouse’s proof of claim, executed and filed in accordance with the Federal Rules of Bankruptcy Procedure, constituted prima facie evidence of the validity and the amount of the claim under Bankruptcy Rule 3001(f), and controls.

Additionally, the Uzaldin court raised sua sponte whether this bankruptcy case had been filed in bad faith, in accordance with the court’s powers under 11 U.S.C. 105. A Chapter 13 bankruptcy petition may be dismissed and a Chapter 13 plan may be denied confirmation if filed in bad faith. See 11 U.S.C.A. §§ 1307(c).  Here, the Chapter 13 debtor’s objection to former spouse’s claim raised troubling questions about his good faith in both filing the petition and proposing the chapter 13 plan. The Uzaldin court restated the rule that it will not dismiss the bankruptcy petition for bad faith unless certain factors discussed in the Seventh Circuit’s Love decision were met including: the nature of the debt, whether the debt would be nondischargeable in a Chapter 7 proceeding, the timing of the petition, how the debt arose, the debtor’s motive in filing the petition, how the debtor’s actions affected creditors, the debtor’s treatment of creditors before and after the petition was filed, and whether the debtor has been forthcoming with the bankruptcy court and the creditors. In re Love, 957 F.2d 1350 (7thCir.1992).  Due to several of these factors being met, the court issued a notice to show cause why the case should not be dismissed for have been filed in bad faith.

You should consult with your Virginia bankruptcy lawyer regarding the dischargeability of attorney’s fees arising out of your family law matters.

Must wife’s divorce complaint based on husband’s desertion allege a marital domicile in Virginia to satisfy long-arm jurisdiction?

Not necessarily, if the allegations support the requisite inferences for personal jurisdiction, the Court of Appeals of Virginia ruled in the case of Cabaniss v. Cabaniss, 46 Va.App. 595, 620 S.E.2d 559 (Va.App., 2005).

The wife filed a divorce in Virginia against the nonresident husband alleging willful desertion and abandonment and requesting divorce, spousal support and equitable distribution.  The husband was served in Canada after residing in the West Indies. Husband’s argued that the complaint did not sufficiently state that the parties had been maintaining a matrimonial domicile at the time they separated, as required by the long-arm statute, Virginia Code Section 8.01-328.1(A)(9), and therefore the court did not have personal jurisdiction over him.   He entered a special appearance objecting to the exercise of long-arm jurisdiction over him.  The Virginia divorce court judge overruled husband’s objection and husband did not participate further in the case, other than to note his objection to the order.  The wife obtained a divorce, equitable distribution of marital property, spousal support and her legal fees and costs.  Husband appealed.

In Cabaniss, the Virginia Court of Appeals held that personal jurisdiction could be exercised over the non-resident husband based on the allegations in wife’s complaint for divorce.  The court noted that a divorce could be entered based on in rem jurisdiction alone, but an order affecting a party’s property interest, such as support or equitable distribution, required in personam jurisdiction.  In this case, the divorce judge did not err in finding personal jurisdiction over husband pursuant to the long-arm statute based on allegations in wife’s complaint that  i) husband deserted her on specific date; ii) husband’s desertion had continued since that date without interruption and husband has not returned to the matrimonial domicile iii) wife was domiciled in and a bonafide resident of Virginia; iv) husband lived abroad; v) the parties last cohabitated in Lexington, Virginia; and v) husband, while abroad, called wife and informed her that marriage was over and he wanted a divorce.

It is true that the long-arm statute requires the complaint to allege that Virginia was the matrimonial domicile at the time of separation “or other relevant time under the statute.” Although the wife’s complaint did not use precise wording, the Virginia Court of Appeals held that the husband could not mistake the true nature of the claim, which could be drawn from the requisite inferences of the allegations. The appellate court reasoned that when the allegations of the complaint are read together they add up to sufficient allegations that the parties were maintaining a Virginia domicile at both time of separation and time cause of action for desertion arose.   Because of his conduct and connections with the Commonwealth of Virginia, the husband could reasonably anticipate being subject to the jurisdiction of the court.

As an aside, the Court of Appeals noted that a demurrer is the more appropriate defensive pleading for a jurisdictional challenge that is limited to the face of the complaint. A demurrer reaches defects as appear on the face of the pleading demurred to, i.e. failure to state a cause of action. Since the Husband had failed to file a demurrer to the complaint for divorce, the court was charitable to even to consider his case.

You should consult with your Virginia divorce lawyer concerning whether the court can exercise long-arm jurisdiction over your non-resident spouse.

Will personal service on nonresident in Virginia support a divorce decree?

Yes, Court of Appeals of Virginia ruled in the case of Ragouzis v. Ragouzis, 10 Va.App. 312, 391 S.E.2d 607 (1990), provided the court has long-arm jurisdiction over the defendant.  While residing in another state, a husband and wife separated and wife filed a divorce action there. The wife then moved with her child to Pulaski County, Virginia.  Approximately five months later, the wife filed a second bill of complaint for a divorce in the City of Radford, Virginia, which she believed, in good faith, was her husband’s place of residence because he was occupying an apartment there. The caption of the bill of complaint contained the husband’s Radford address. The sheriff served the husband when he answered the door at his Radford apartment.

The City of Radford, Virginia, Circuit Court found that husband routinely visited Radford to conduct business but that he had retained his permanent residence and domicile in Ohio. Hence, the court found he was a resident of Ohio. Because husband was a non-resident and the wife was a resident of Pulaski County, Virginia, under Virginia Code § 20-96(B), then in effect, venue was proper in Pulaski County. Pursuant to the provisions of Code § 20-96(C), the Radford Circuit Court transferred the case to the Pulaski County Circuit Court, which is in the same judicial circuit as the City of Radford. By decree of the Pulaski County Circuit Court, the wife was granted a divorce.  The decree did not address child custody, visitation, child support, spousal support, or equitable distribution.

On appeal, the husband contended that the trial court lacked jurisdiction over him because the service on him, a nonresident did not conform to Virginia Code § 8.01-328.1, the long arm statute. Virginia has a long arm jurisdiction statute in Code Section 8.01-328.1 that allows Virginia to exercise jurisdiction over a person in another state when that person has certain connections to the Commonwealth of Virginia.  Particularly relevant to divorce cases, these connections include owning real estate in Virginia, executing a support agreement in Virginia, being ordered to pay spousal or child support by a court in Virginia that has personal jurisdiction, fathering or conceiving a child in Virginia, or having a marital domicile in Virginia prior to separation. Additionally, husband also claims that the Circuit Court of Pulaski County lacked subject jurisdiction under Code § 20-96 because the case was transferred to it by a court without jurisdiction.

The Virginia Court of Appeals ruled in favor of the wife. The court noted that the Virginia long arm statute provides additional methods of service on nonresident defendant, not exclusive methods of service, and does not supplant previously authorized methods of personal service provided by law. Virginia Code § 8.01-328.1. http://leg1.state.va.us/cgi-bin/legp504.exe?000+cod+8.01-328.1.  The Virginia Court of Appeals found that service through the Secretary of the Commonwealth was not the exclusive method for service of process under the Virginia long-arm statue and that, generally, personal service on a nonresident in Virginia is valid and will support a personal judgment against that nonresident.  Further, in regards to husbands’ second contention, the court ruled that the Radford Circuit Court had potential subject matter jurisdiction to hear the divorce case, and therefore, had jurisdiction to transfer case to a court which was the proper venue once the court acquired personal jurisdiction over husband by personal service upon him during routine business trip. See Temple v. City of Petersburg, 182 Va. 418, 29 S.E.2d 357 (1944).

It should be noted that all circuit courts within the Commonwealth of Virginia have potential subject matter jurisdiction to try divorce cases.  Preferred venue in divorce, annulment, and affirmance cases is the county or city where the parties last resided, the county or city where the defendant resides, if a resident of Virginia, or when the defendant is served by order of publication, the city or county in which the plaintiff resides, under Section 8.01-261(19) of the Code of Virginia.

You should consult with your Virginia divorce lawyer to determine whether jurisdiction exists for a divorce proceeding and what would be the proper venue for your case.

Can a foreign divorce decree be challenged in Virginia?

Yes, the Supreme Court of the United States ruled in the case of Williams v. North Carolina, 325 U.S. 226, 65 S.Ct. 1092, 89 L.Ed. 1577 (1945). While the Williams case does not directly concern Virginia law or bankruptcy law, the case has had far reaching implications on the extent to which each state must respect the judgments of her sister states, including divorce decrees affecting spousal support or alimony, property division, equitable distribution, or the allocation of marital debts, when one spouse leaves Virginia and obtains a divorce in a different state.  The validity of a foreign divorce can impact bankruptcy by its effects on property transfers and financial obligations.

In Williams, a man and a woman, domiciled in North Carolina, left their spouses in North Carolina in order to obtain decrees of divorce in Nevada. The Nevada court granted the petitioners divorce decrees since it found that they had been residents in Nevada for more than six weeks immediately preceding the commencement of their divorce action, as required by Nevada law.

After obtaining their divorce decrees, petitioners were married in Nevada then returned to North Carolina to live. Subsequently, the petitioners were prosecuted in North Carolina for bigamous cohabitation.  Petitioners pleaded not guilty and offered copies of the Nevada proceedings, contending that the divorce decrees and the Nevada marriage were valid in North Carolina as well as in Nevada. The state contended that since neither of the defendants in the Nevada actions were served in Nevada nor entered an appearance there, the Nevada decrees would not be recognized as valid in North Carolina.  North Carolina further contended that petitioners went to Nevada not to establish a bona fide residence but solely for the purpose of taking advantage of the laws of that state to obtain a divorce thru fraud upon that court.

The United States Supreme Court held that, upon the record, the judgments of conviction were not invalid as denying the Nevada divorce decrees the full faith and credit required by Art. IV, § 1 of the Constitution. Under our system of law, judicial power or jurisdiction to grant a divorce must be founded upon domicile.  Domicile is defined as a person’s legal home or permanent residence.  Domicile implies a connection between a person and a place beyond mere physical presence, but also an intention to return there or an intention to stay for the indefinite future. Here, the petitioners were domiciled in North Carolina and the Nevada court lacked personal jurisdiction. See Haddock v. Haddock, 201 U.S. 562 (1906). Hence, A decree of divorce rendered in one State may be collaterally impeached in another by proof that the court which rendered the decree had no jurisdiction, even though the record of the proceedings in that court purports to show jurisdiction.

You should consult with your Virginia divorce lawyer concerning the validity of your foreign divorce.

Must the marital status of a husband and wife be recited on the face of a deed in Virginia in order to create a valid tenancy by the entirety?

Ideally, the creation of a tenancy by the entirety in Virginia includes three elements in the granting clause of the document creating or evidencing the transfer of title: (1) the marital status of the parties as husband and wife; (2) the language “as tenants by the entirety” or the term “tenancy by the entirety”; and (3) language of survivorship such as “with the common-law right of survivorship” or “with the right of survivorship as at common-law”.  (Apart from the language, the tenancy itself requires five unities of time, title, interest, marriage and possession, as discussed below).  Thus a typical clause might state the property is conveyed to John Doe and Mary Doe, husband and wife, as tenants by the entirety with the common-law right of survivorship.

What happens when one of these elements is missing?  Does a tenancy by the entirety exist, such that the property is protected from the creditors of either spouse alone, or is the property vulnerable because the husband and wife hold title as joint tenants or tenants in common?

There appears to be a split of authority in case law between the courts in the Eastern and Western Districts of Virginia when the marital status is missing.  In Sampath, 314 B.R. 73 (Bankr. E.D.Va.,2004), a Chapter 7 bankruptcy debtor claimed as exempt as a tenancy by the entirety property, his interest in a condominium unit owned by him, his wife, and their child as joint tenants with the common-law right of survivorship. The Trustee objected on the ground that debtor’s marital status was not recited in the deed. The Sampath opinion centered heavily on the common law principle that property owned by husband and wife with right of survivorship was deemed to be held as a tenancy by the entirety. See 41 Am.Jur.2d, Husband and Wife, § 31 (2004). Under Virginia law, if husband and wife hold property in a tenancy by the entirety, the joint property is immune to the claims of a creditor of one spouse alone, as explained more fully in answer to the question, “Is my Virginia real estate vulnerable to creditors when I divorce?”. Only joint creditors may subject the property to a lien or judgment.

Sampath also relies on Allen v. Parkey, 154 Va. 739, 149 S.E. 615 (1929). In Allen, the court found that a conveyance to a husband and wife during marriage with language of survivorship created a tenancy by the entirety even though the exact language of “tenancy by the entirety” was never used in the deed. Sampath agreed with the Allen court and held that a parties’ marriage was sufficient to create a tenancy by the entirety without any reference to the marriage made in the document purporting to give title.

The holding in Sampath by the United States Bankruptcy Court for the Eastern District of Virginia contrasts with the U.S. District Court for the Western District Court of Virginia in Wolfe v. Sprouse, 183 B.R. 739 (W.D.Va.1995), an appeal of a bankruptcy court decision.  In Wolfe, the district court reversed the bankruptcy court judge and held that two promissory notes payable to the debtor and his spouse, “or the survivor” were not held as tenants by the entirety property because “the language of the [instrument] … lack[ed] even the hint of a marital relationship.”  The court noted that five unities must exist to create a tenancy by the entirety:  the unities of interest, title, time, marriage, and possession.  In this case, as distinguished from the Allen case, the language indicating the unity of marriage was wholly absent from the instrument.

You should consult with your Virginia bankruptcy lawyer to discuss whether property held by you and your spouse, husband or wife, may be exempt in bankruptcy.