RBS Citizens, N.A. v. Ouhrabka
190 Vt. 251, 30 A.3d 1266 (2011) 2011 VT 86 (2011)
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Rule of Law:
Property held by a married couple as tenants by the entirety cannot be attached by a creditor to satisfy the individual debt of only one spouse. The legal doctrine of tenancy by the entirety, based on the principle of marital unity, remains valid despite the enactment of statutes granting married women equal property rights.
Facts:
- Jan Ouhrabka signed a personal guaranty making him personally liable for all debts owed by his company, Providence Chain Co., to RBS.
- Providence Chain Co. was placed into receivership, at which time it owed RBS over $15,000,000.
- Ouhrabka owed RBS an estimated $10,000,000 under his individual unlimited guaranty.
- Ouhrabka and his wife, who was not a party to the guaranty, jointly owned a property in Vermont as tenants by the entirety.
- During the loan process, Ouhrabka had submitted a personal financial statement to RBS that listed the Vermont property as a joint asset.
Procedural Posture:
- RBS sued Jan Ouhrabka in the Vermont superior court (trial court) to recover money owed under a personal guaranty.
- In conjunction with its complaint, RBS filed a motion for a prejudgment writ of attachment against Ouhrabka's Vermont real estate.
- The trial court initially granted the writ of attachment on an interim basis.
- After a hearing, the trial court denied RBS's motion for a writ of attachment, holding that property held in tenancy by the entirety is protected from the creditors of a single spouse.
- RBS (appellant) was granted permission for an interlocutory appeal to the Supreme Court of Vermont.
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Issue:
Does Vermont law permit a creditor of one spouse to place a prejudgment attachment on real property that the debtor spouse owns with a non-debtor spouse as tenants by the entirety?
Opinions:
Majority - Reiber, C.J.
No. Vermont law does not permit a creditor of one spouse to attach property held as tenants by the entirety to satisfy that spouse's sole debt. The theoretical basis for tenancy by the entirety is the common-law principle of marital unity, which treats the married couple as a single legal entity for ownership purposes, not the outdated concept of a wife's coverture disabilities. While the Rights of Married Women Act equalized the spouses' control over marital property, it did not abolish the underlying unity of title that protects the property from individual creditors. Vermont common law has long held that property held in tenancy by the entirety is exempt from attachment or execution for the sole debts of one spouse, as neither spouse has a separate share that can be disposed of or encumbered without the joinder of the other. The court declined to overturn this established precedent to correct a sophisticated creditor's failure to require the non-debtor spouse to co-sign the loan.
Analysis:
This decision reaffirms the strong creditor protection afforded by the tenancy by the entirety estate in Vermont. It clarifies that the doctrine's foundation is 'marital unity,' not the historical subjugation of women's property rights, thus insulating it from arguments that modern equal rights statutes have rendered it obsolete. The ruling serves as a strong reminder to sophisticated creditors that they must conduct thorough due diligence on how a debtor's assets are titled. To reach property held in this form, lenders must secure the liability of both spouses, as courts will not rewrite established property law to remedy a creditor's failure to do so.
