In re Planas Case Analysis

In In re Planas, 199 B.R. 211 (Bankr. S.D. Fla. 1996), rev’d in part sub nom. Planas v. Feltman, 1998 WL 757988 (S.D. Fla. Aug. 21, 1998), the bankruptcy court found that a couple’s accounts were never tenancy by the entireties property. A third person could write checks on the couple’s brokerage account and held their bank account with them, and each arrangement destroyed a unity that entireties ownership requires.

The account rulings are the decision’s durable contribution, and nothing in the later case law disturbs them. The court’s joint-debt rulings fared differently: the district court reversed the decision in part on appeal, and later decisions of the same court decline to follow its two broadest holdings.

How the Planas Accounts Were Titled

Juan Planas filed an individual chapter 7 petition in December 1994 and claimed almost everything he owned as tenancy by the entireties property held with his wife, Sylvia. The couple, married 32 years, held a $67,000 Merrill Lynch account, a $300 SunBank checking account, and $30,000 of stock in two family construction companies. Planas also claimed household goods and art worth $4,000 and a Miami warehouse with about $23,000 in equity. His homestead was exempt on separate grounds, and the trustee never challenged it.

The account records did not match the exemption claims. Special instructions on the Merrill Lynch application authorized Celia Novo, the wife’s mother, to execute checks as the couple’s agent and attorney in fact. The SunBank account was titled in four names: Mr. and Mrs. Planas, their adult daughter, and Mrs. Novo. And when the couple opened a new Merrill Lynch account in October 1994, they designated it a joint account with right of survivorship even though the form offered a tenants-by-the-entireties option for married customers.

The chapter 7 trustee objected to every entireties claim. He argued that the accounts had never been entireties property and that the couple’s joint debts let him liquidate the rest for the benefit of the estate.

Why the Accounts Failed the Unities Test

A Florida tenancy by the entireties must possess five unities at all times: joint possession and control, identical interests, title from the same instrument, interests that began at the same moment, and marriage. The court took the list from First National Bank of Leesburg v. Hector Supply Co., the Florida Supreme Court’s decision applying entireties ownership to personal property.

The Merrill Lynch account failed the test twice. Mrs. Novo could write checks alone, and her power was inconsistent with the unity of possession, which keeps ownership and control in the two spouses. The couple’s own paperwork was the second problem, because they had selected the survivorship option on an application that offered an entireties designation. The court sustained the objection and directed the trustee to administer the debtor’s half interest, about $33,500.

The SunBank account failed for a simpler reason. Four people were account holders during the year before the petition, so the account never had the unities of a two-spouse estate. That the deposits were the couple’s wages did not matter. The trustee was directed to administer the debtor’s interest of about $150.

Florida law now gives married couples a presumption that the Planases did not have. Under Beal Bank v. Almand, a joint marital account is presumed entireties property unless the couple expressly disclaims that form of ownership, and a bare survivorship label no longer defeats the presumption. Picking survivorship where the form offers an entireties choice is an express disclaimer, so the election the Planas couple made would cost them the protection today as well.

The Joint-Debt Rulings in the Bankruptcy Court

Entireties ownership stops the creditors of one spouse; it has never stopped a creditor to whom both spouses owe the same debt. The Bankruptcy Code carries that Florida line into a chapter 7 case: the provision now numbered section 522(b)(3)(B) lets a debtor exempt an entireties interest only to the extent Florida law makes it immune from process.

The Planases owed two joint debts, both mortgages. The homestead mortgage dropped out because the homestead was exempt. That left the warehouse mortgage, a $114,093.80 debt to Coral Gables Federal Savings and Loan. The court held that a qualifying joint creditor needs no execution writ, no final judgment, and not even a default; being entitled to levy is itself one of a joint creditor’s rights.

The court then took the two positions that would define the creditor-side reading of Florida entireties law in bankruptcy. It held that the one mortgage exposed every remaining entireties asset—the warehouse, the stock, and the household goods—no matter that the debt was smaller than the property. And, following Moore v. Bay, 284 U.S. 4 (1931), and adopting In re Amici‘s reasoning that paying only joint creditors would create a favored sub-class, it held that every creditor shared in the recovery, not only the creditors both spouses owed.

The court sustained every objection: the two accounts, the stock, the warehouse, and the household goods, though Planas could still amend his schedules to claim a half interest in the goods under the Florida Constitution’s personal property exemption.

Reversed in Part on Appeal

Not all of those rulings stood. The district court reversed in part in Planas v. Feltman, 1998 WL 757988 (S.D. Fla. Aug. 21, 1998). It held that one joint debt could not destroy the exemption in every entireties asset, and that individual creditors could not share the proceeds. Following the majority of Florida bankruptcy courts, it held that only joint creditors can be satisfied from entireties property, so the warehouse could not be liquidated to pay the debtor’s individual creditors.

The exemption is not destroyed by the presence of a joint creditor; it is simply not applicable to that creditor. Giving individual creditors access to the proceeds would create new substantive rights under state law, contrary to Butner v. United States, and § 522(b)(2)(B) mandates strict adherence to Florida law. The court added that the exemption is properly viewed through the non-debtor spouse’s ability to protect the family’s property, a security that should not evaporate because one spouse ran up individual debt and filed.

The rest of the order fared differently. The Merrill Lynch ruling was affirmed, because Florida presumes against an entireties estate in personalty and the couple chose survivorship over the entireties option the form offered. The SunBank ruling was affirmed as well, and the alternative wage claim under § 222.11 failed for want of proof. The stock, furnishings, and art rulings were reversed and sent back for an evidentiary hearing, because the bankruptcy court had merely assumed they were entireties property while reaching the conclusion the district court rejected.

The appeal left the qualifying-creditor ruling alone. The district court reversed on what the joint debt reached and on who was paid, and later courts still cite the bankruptcy court’s holding that a qualifying joint creditor needs no judgment.

How Later Courts Treat Planas

Another judge of the same court had already gone the other way on both points before the appeal was decided. In 1997, In re Monzon, 214 B.R. 38 (Bankr. S.D. Fla. 1997), held that the joint debts cap what a trustee may administer and that the joint creditors alone receive the proceeds. It also held that a single fully secured mortgage—the very kind of joint debt Planas rested on—does not justify administering entireties property at all.

On one point, Monzon agreed with Planas: a joint debt need not be reduced to judgment, because prejudgment remedies already make entireties property reachable under Florida law. A separate line, running through Grant v. Himmelstein and In re Collins, requires an actual judgment, and that disagreement remains unresolved.

The last known treatment comes from the same district. In Romagnoli, the trustee asked the court to disregard the district court’s reversal and follow Planas anyway. The court declined, calling the joint-creditors-only rule the majority position among both Southern District and Middle District bankruptcy judges. The account-titling rulings stand apart: no later court has questioned the holding that a third person’s ownership or signing authority destroys the entireties unities.

What Planas Means for Entireties Planning Today

Every entireties failure on the accounts was avoidable. They lost protection because a third person could sign on one and co-owned the other, and because the couple picked the wrong box on a form that offered the right one. Tenancy by the entireties protects an account only while the two spouses alone own and control it, so adding a parent or an adult child to a couple’s account trades the protection for convenience. In Planas, signing authority the wife’s mother held as the couple’s agent—she owned no part of the brokerage account—destroyed the tenancy.

Joint debts remain the doctrine’s other boundary, and that rule does not depend on Planas. A creditor to whom both spouses owe the same debt can reach entireties property, and entireties property in bankruptcy can come into administration when one exists. The appeal and the later decisions rejected what Planas added: recovery for every creditor, measured by the whole property. The prevailing decisions cap administration at the amount of the joint debts and pay only the joint creditors. A couple weighing an individual filing counts every joint obligation first, down to a shared credit card.

Outside bankruptcy the rule is narrower, since a creditor must hold a claim against both spouses before touching entireties assets, and how an entireties account is opened decides whether the protection exists at all. Planas sits with Beal Bank, Loumpos, and the other Florida tenancy by the entireties decisions that mark where the protection begins and ends, part of the Florida asset protection case law that federal bankruptcy courts apply.