Opinion
Case No. 00-20494, Chapter 13
August 11, 2000
ORDER DENYING CONFIRMATION OF CHAPTER 13 PLAN
This case is before the court on the chapter 13 trustee's objection to confirmation of the debtor's chapter 13 plan. The court held a hearing on the objection July 26, 2000.
The trustee objects that the plan does not meet the best interests of creditors' test required by 11 U.S.C. § 1325(a)(4) because the debtor's plan does not include the value of certain real property in the amount to be distributed under the plan. The issue is to what extent the debtor's interest in the real property is property of the estate to be included in her hypothetical liquidation analysis.
In August 1998, the debtor, Penny Hoflund, and her mother, Marjorie Hoflund, purchased a residence at 1521 East 16th Street, Cheyenne, Wyoming. Penny Hoflund paid the earnest money of $500 and her mother satisfied the rest of the purchase price with cash of $76,000. The value of the residence at the time of the filing of the bankruptcy petition is not in evidence.
The debtor and her mother took title to the property as joint tenants with rights of survivorship. Since the purchase, the debtor has lived in the house and paid her parents intermittent rent of $400 per month.
Conclusions of Law
All of a debtor's legal and equitable interests are property of the estate under 11 U.S.C. § 541(a). The extent and nature of that interest is determined in accordance with state law. In re Taylor, 133 F.3d 1336, 1341 (10th Cir. 1998), cert. denied, Rupp v. Taylor, 525 U.S. 873 (1998). In this case, the applicable law is that of Wyoming.
When a transfer is made to a family member, or the purchase money for property is provided by a family member, there is an inference that a gift was intended. Restatement (Third) of Trusts § 7 (Tentative Draft 1996). In this case, the evidence supports, and the debtor does not dispute, that her mother's intention was to create a gift of the joint tenancy to the debtor. Any agreement to pay rent is unwritten and not enforced. The payment of rent was erratic until the bankruptcy case was filed.
Although not favored, Wyoming is a state which recognizes joint tenancies with rights of survivorship. Choman v. Epperling, 592 P.2d 714, 716 (Wyo. 1979). Co-owners of a joint tenancy take identical interests simultaneously by the same instrument and with the same right of possession. The interests are physically undivided and each undivided interest is equal. Black's Law Dictionary 1477 (7th ed. 1999).
The debtor argues the extent and value of her interest in the property should be determined with respect to her contribution to the purchase price. With respect to property held as tenants in common, the debtor is correct. The Wyoming Supreme Court has held that one's proportionate interest in a tenancy in common in real property is determined by the amount of the contribution made by each tenant to the purchase price. Binning v. Miller, 102 P.2d 64, 71, 55 Wyo. 478 (1940).
That is not the rule with respect to joint tenancy however, which by definition means equal ownership. Contribution is irrelevant to a partition of joint tenancy property. Milian v. De Leon, 181 Cal.App.3d 1185, 226 Cal.Rptr. 831, 836 (Cal.App. 1986).
The case of Schulz v. Miller, 837 P.2d 71 (Wyo. 1992) is factually similar to this case in that the parties owned real property in a joint tenancy with rights of survivorship, the entire consideration having been paid by the plaintiff. The Wyoming Supreme Court affirmed the trial court's decision holding that a sale of the property and distribution of the proceeds in equal shares was proper in lieu of partition. The court ruled that the joint tenant, who had paid none of the consideration, had a vested equal interest in the property. Id. at 74.
This court concludes the debtor's interest in the real property was acquired as a gift from her mother, and the value of her interest is equal to that of her mother, i.e., one half the fair market value of the residence. Because this is a chapter 13 case, a sale or partition is unnecessary, but the debtor must include the value of her one-half interest in her hypothetical liquidation analysis.
IT IS, THEREFORE, ORDERED that confirmation of the debtor's chapter 13 plan is denied without prejudice to amendments in accordance with this order.