Indiana Supreme Court Currently Reviewing Statute Of Limitations Rules Applicable to Promissory Notes
Indiana Supreme Court Rules On Statute Of Limitations Cases

Interests Held In A Joint Tenancy With Right Of Survivorship Are Not Exempt From Execution

Lesson.  Unlike spouses jointly holding real estate as a tenancy by the entireties, real estate co-owned under joint tenancy is subject to a lien arising from a judgment against one of the joint tenants. 

Case cite.  Flatrock River Lodge v. Stout, 130 N.E.3d 96 (Ind. Ct. App. 2019)

Legal issue.  Whether an ownership interest in real estate as a joint tenant with right of survivorship is exempt from execution on a judgment lien created during the owner’s lifetime.

Vital facts. In 1985, a couple deeded forty-six acres of real estate in Rush County to their son and their granddaughter as joint tenants with right of survivorship.  In 2016, a creditor obtained a $40,000 judgment against the son, at which time the Rush County Clerk entered the judgment in the record of judgments.  The son died in 2018, and his interest in the real estate became the granddaughter’s.  In other words, the granddaughter became the owner of all forty-six acres.      

Procedural history.  In January 2018, the judgment creditor moved to foreclose its judgment lien on the real estate.  The granddaughter intervened in the action and asserted that the son’s interest was exempt from execution because their interests were held jointly.  While the action was pending, the son passed away.  The trial court ultimately granted the granddaughter’s objection to the creditor’s motion.  The creditor appealed.

Key rules. 

As stated here many times, in Indiana “a money judgment becomes a lien on the defendant’s real property when the judgment is recorded in the judgment docket in the county where the realty held by the debtor is located.”

Ind. Code 34-55-10-2(c)(5) is the statute providing that “’[a]ny interest that the debtor has in real estate held as a tenant by the entireties’ is exempt from execution of a judgment lien.”

The Court in Flatrock identified the three forms of concurrent ownership in Indiana - (1) joint tenancy, (2) tenancy in common, and (3) tenancy by the entireties – and then contrasted joint tenancy with tenancy by the entireties:

A joint tenancy is a single estate in property owned by two or more persons under one instrument or act. Upon the death of any one of the tenants, his share vests in the survivors. When a joint tenancy is created, each tenant acquires an equal right to share in the enjoyment of the land during their lives. “It is well settled that a conveyance of his interest by one joint tenant during his lifetime operates as a severance of the joint tenancy as to the interest so conveyed, and [it] destroys the right of survivorship in the other joint tenants as to the part so conveyed.” Each joint tenant may sell or mortgage his or her interest in the property to a third party.  And the interest of each joint tenant “is subject to execution.” On the other hand, a tenancy by the entireties exists only between spouses and is premised on the legal fiction that husband and wife are a single entity.

* * *

The same difference which existed at common law between joint tenants and tenants by entireties continues to exist under our statute. In both, the title and estate are joint, and each has the quality of survivorship, but the marked difference between the two consists in this: that in a joint tenancy, either tenant may convey his share to a co-tenant, or even to a stranger, who thereby becomes tenant in common with the other co-tenant; while neither tenant by the entirety can convey his or her interest so as to affect their joint use of the property during their joint lives, or to defeat the right of survivorship upon the death of either of the co-tenants; and there may be a partition between joint tenants, while there can be none between tenants by entireties.

(I’ve omitted legal citations in the above quotes.)

Holding.  The Indiana Court of Appeals reversed the trial court and held that the real estate was not immune from execution on the judgment lien.  “We hold that subsection 2(c)(5) does not exempt from execution interests held in a joint tenancy with right of survivorship.”

Policy/rationale.  The granddaughter generally contended that real estate held jointly should be exempt from execution.  Thus, she sought to apply the I.C. 34-55-10-2(c)(5) exemption to a joint tenant with right of survivorship.  The granddaughter improperly equated the two tenancies, however.  The Court was compelled to follow the clear language in the exemptions statute, which applied only to tenancy by the entireties in which one spouse may not unilaterally convey or mortgage his interest to a third party and in which the property “is immune to seizure for the satisfaction of the individual debt of either spouse.”  To the contrary, a joint tenant may sell or mortgage his interest to a third party.  The Court also pointed out that the granddaughter took the son’s interest in the real estate subject to the judgment lien, which was not extinguished upon his death. 

As an aside, the Court stated that, if a third party were to buy the son’s interest at the execution (sheriff’s) sale, the purchaser and the granddaughter would each own an undivided interest as tenants in common.  As a practical matter, the outcome of the Flatrock appeal likely compelled the granddaughter to pay off the lien, assuming she had the means.

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I represent lenders, loan servicers, borrowers, and guarantors in foreclosure and real estate-related disputes. If you need assistance with a similar matter, please call me at 317-639-6151 or email me at john.waller@woodenlawyers.com. Also, don’t forget that you can follow me on Twitter @JohnDWaller or on LinkedIn, or you can subscribe to posts via RSS or email as noted on my home page.

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