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Marital Bank Accounts as Entireties Property: What Is the Current State of Florida Law?

Business Law

F lorida courts have long recognized that marital bank accounts may be held in a tenancy by the entireties (TBE).1 H owever, the Fifth District’s recent decision in Beal Bank, SSB. v. Almand & Assoc., 710 So. 2d 608 (Fla. 5th DCA 1998), demonstrates the uncertainty with which courts apply the principles underlying the TBE doctrine. In a severely fractured opinion, the three-judge panel wrote a one-paragraph per curiam opinion affirming the trial court, and each judge wrote a separate concurring or concurring and dissenting opinion. The individual opinions appeared to take diametrically opposed views on the exact same accounts. Other recent Florida cases indicate that lower courts are substantially at odds with certain theories underlying TBE principles, and have registered opinions from one end of the spectrum to the other on bank accounts that appear to be identical.

TBE and Marital
Accounts Generally

To establish a TBE estate in any realty or personalty, the four unities of time, title, interest, and possession plus the element of marriage must be present.2 Florida banks vary as to whether they will open a TBE account.3 Unlike Florida realty in which a TBE is presumed,4 there is no presumption that husband and wife automatically hold property in a TBE manner when the language of the bank account does not identify any particular ownership status. Even assuming that the four unities and marriage are present before establishing the account, most Florida courts also require the depositors to demonstrate an intent to hold the account in a TBE status.5

Because most Florida banks do not include TBE language on the depositors’ signature card, or fail to recognize the account ownership status entirely, the intent requirement has generated much post-judgment and bankruptcy litigation. The proofs required by various Florida courts are amorphous and inconsistent. Borrowers, lenders, and lower courts are in need of intervention by the Florida Supreme Court or the Florida Legislature so that everyone will more readily discern what accounts may be subject to the reach of creditors.6

The Beal Bank Case

Beal Bank provides a good foundation from which to explore the TBE issues. Unfortunately, none of the four opinions clearly set forth the facts as found by the trial court. From reviewing the parties’ appellate briefs, we learned that nine separate accounts were at issue. The accounts and the accompanying language of the ownership status was as follows:

Financial Ownership
Institution Language

Barnett Bank7 Amos Almand, Jr. and Doris Almand

Compass Bank Amos Almand III, Sue Almand

Compass Bank Amos Almand or Sue Almand

Compass Bank Jane D. Freeman, Sandra N. Freeman,

Amos F. Almand III and Sue C. Almand

Compass Bank Amos Almand (Sal- ary Account)

Compass Bank Amos Almand, Jr. or Doris Almand

Compass Bank Amos Almand, Jr. and Doris Almand

SouthTrust Bank Amos Almand, Jr. and Doris Almand, JT TEN

Merrill, Lynch8 Amos Almand III and Sue Almand

When both of the Almand husbands defaulted on mortgage and note obligations in connection with a construction project, Beal Bank obtained a foreclosure judgment and ultimately garnished these accounts.9 The court issued a per curiam opinion finding that the Merrill, Lynch account was subject to execution,10 and the salary account held by Compass Bank was not subject to execution.11 The rest of the accounts were found to be TBE accounts, and, therefore, exempt from execution.

With respect to the remaining accounts, Judge Cobb’s concurring and dissenting opinion focused on the husbands’ testimony that their wives did not need consent to “withdraw the funds in any of the accounts for any purpose,” even one totally unrelated to the marital unit.12 Judge Cobb found significant that the husbands did not know the legal significance of a TBE account when those in the immediate case were established, and the wives did not testify as to the intent behind creating the accounts.13 Based on these facts, he believed that the depositors did not meet their burden of demonstrating an intent to create TBE accounts. Accordingly, he dissented from the per curiam opinion and would have held none of the remaining accounts exempt. Beal Bank, 710 So. 2d at 612.

In contrast, Judge Harris stated that the Barnett deposit agreement governed the rights between the depositors and the bank only, and did not govern the depositors’ rights vis-à-vis third party creditors.14 He believed that the signature cards executed by the depositors on all accounts gave each spouse authority for their withdrawals,15 and the testimony showed that the parties intended to create accounts “with the attributes” of a TBE estate.16 These facts, along with the presence of the five unities, were enough for Judge Harris to believe that all of the accounts were held as a TBE. Judge Harris expressly noted that the parties did not have to know the legal significance of the estate when it was created, but that “the only intent necessary to be proved. . . is the intent that each spouse owns the entire account and not a divisible portion thereof.”17

Judge Sharp sided with Judge Harris on all accounts except for two. First, he held that the Barnett account was subject to execution because the deposit agreement expressly disclaimed that the account was held by the entireties.18 Second, the SouthTrust account had the term “JT TEN” after the depositors’ names, which convinced Judge Sharp that the parties did not intend to hold the funds in a TBE account.19 He would not allow parol evidence of intent to support the creation of a TBE estate when these two accounts expressly repudiated that estate.20 Judge Sharp also found telling the fact that the parties did not know what a tenancy by the entireties was when the accounts were created, nor did the parties discuss the issue with a representative from the respective banks.21

Burdens of Proof
and Presumptions

In Beal Bank, each judge properly placed the burden on the Almands to prove their actual intent was to create a TBE estate in the accounts. Florida case law requires parties asserting a TBE estate in personalty to prove their intent from the facts and circumstances surrounding the transaction. The Florida Supreme Court, in First Nat. Bank v. Hector Supply Co., 254 So. 2d 777, 780 (Fla. 1971), noted that problems inherent in most personal property necessitate the intent mandate. The Hector court observed a distinction between realty and personalty, finding that the former was transferred infrequently and was made a matter of formal record when it did occur, which is why the intent behind the acquisition of realty is not questioned absent fraud.22

Differences between personalty and realty have given Florida courts solace in demanding depositors show an intent to create a TBE account.23 This view differs from that of other states that afford husband and wife depositors a presumption that a joint account is taken in an entireties status unless indicated otherwise or disproven by a party in interest.24 In states that have a presumption in favor of a TBE, judgment creditors often are faced with pursuing the individual judgment debtor in a supplementary fraudulent transfer action to determine if TBE funds can be recovered.25 In Roberts & Lloyd, Inc. v. Zyblut, 691 A.2d 635, 638 (D.C. App. 1997),the court noted that “‘the rights and remedies of existing creditors [could not] be obliterated by the simple expedient of erecting a tenancy by the entireties in property that is otherwise vulnerable’ to execution.” Because of the stringent and conflicting proofs needed by some Florida courts to demonstrate the depositors’ intent to create the account,26 a rebuttable presumption that a marital account is held as TBE property in the absence of express language otherwise would conserve judicial resources and solidify the legitimate expectations of borrowers and lenders.

A Current Anomaly

Some bankruptcy judges in the Southern District of Florida have expressly acknowledged that a presumption in favor of TBE property exists, which must be refuted by the creditor.27 This presumption is established when there is 1) a long-standing marriage between the parties; 2) continuous possession of the articles at issue; and 3) testimony by one or both of the parties that the property in question would not be returned to the original purchaser or donor.28 One bankruptcy court in the district has even extended this reasoning to assist a debtor in substantiating a claim that certain bank accounts were presumptively entireties property.29

When the depositors have been married a considerable time, the party challenging the TBE status of a bank account will be able to disprove intent as depositors will be able to establish intent. Typically, the only evidence will be the account documents (i.e., deposit agreement, signature card, etc.) and the testimony of the depositors. Furthermore, an overwhelming majority of depositors are not well versed in the protections of TBE property, as Judges Cobb and Sharp found to be probative in Beal Bank. At least one other court, however, does not consider the depositor’s lack of legal sophistication to be determinative.30

Use of Parol Evidence
to Establish Intent

Some courts that require evidence of intent to create a TBE account also bar the use of parol evidence to establish that intent.31 One daunting problem arises when parol evidence of intent is sought to be introduced even though the account documents expressly identify a different type of co-tenancy. In Beal Bank, Judge Harris “disagree[d] with Judge Sharp that as between the depositor and a third party that the depositor is bound by the language on the signature card.”32 Instead of precluding the depositors from presenting extrinsic evidence of their intent, Judge Harris found the parol evidence rule inapplicable, as Beal Bank was not claiming an interest as a third party beneficiary of the deposit agreements involved.33 He also cited In re Guardianship of Medley, 573 So. 2d 892, 900 (Fla. 2d DCA 1990),for the proposition that asignature card executed between a depositor and a bank is exclusively for the “protection” and “convenience” of the parties involved, and does not affect the ownership status of an account.34

Although parol evidence cannot be used to vary, modify, or contradict the express terms of a written contract,35 such is not the case when a party who is not a signatory or a third party beneficiary of a contract is involved. The fact that the judgment creditor is not a signatory to the contract between the bank and depositors would appear to preclude the creditor from invoking the parol evidence rule.
However, a garnishment proceeding is unique in that the judgment creditor seeks to satisfy a judgment by interposing herself in the contractual relationship between the depositor and a financial institution, often to the detriment of the depositor. The creditor in a garnishment proceeding essentially steps into the shoes of the depositor, and obtains all of the depositor’s rights against the garnishee.36 The depositor should not be allowed to introduce parol evidence of intent to minimize or eliminate the portion of the account available to the creditor. While we agree with Judge Harris’ position that the creditor is not a third-party beneficiary of the agreement between the depositor and the bank, in a garnishment proceeding, the courts should deem the creditor to have a direct contract with the bank as the de jure subrogee or assignee of the depositor against the financial institution. Because the creditor is then not a “stranger” to the deposit agreement, the creditor should not be allowed to introduce parol evidence where the account documents expressly state that an estate other than a TBE is contemplated.37

Necessity of Straw Transfer to Establish TBE Estate

Beal Bank’s per curiam opinion held that the Merrill, Lynch account was subject to execution.38 Judge Cobb expressly noted in his separate opinion that “Almand testified that his wife’s name was added later after he had opened the account, thereby negating one of the requisites for a tenancy by the entireties.”39 Judge Harris agreed on this basis, stating that the account “lacked the unities of time and title and thus is not held as a tenancy by the entireties.”40 Although Florida does not technically require the husband and wife to take realty in the same deed or at the same time in order to establish a TBE,41 the courts apparently maintain the common law view that a husband or wife cannot simply transfer personalty to the marital unit to create a TBE estate.42 Other states have indicated that it is not necessary to erect the fiction of a transfer through a straw party in order to create the estate intended by the grantor. We agree.

As long as the parties’ intent is to hold the account as a TBE estate, the fact that the parties did not establish a wholly new account should not preclude a finding that the required unities exist. Nonetheless, the Florida Supreme Court consistently holds that intent should be a resolute governing factor in finding whether a TBE exists,43 but then ignores the manifested intent of the parties due to an outdated minority rule that requires a fictional transfer to a straw party to effect the estate.

Conclusion

Absent intervention by the Florida Legislature on any of the above issues, the Florida Supreme Court should reconsider whether the burden of proof should remain on the account depositors to prove that a TBE account was intended. Fraudulent transfer and conversion statutes provide an adequate remedy for creditors to use any evidence of misconduct gained in post-judgment discovery. Addressing this issue directly will put to rest the current anomaly in bankruptcies in southern Florida.

If depositors must show the intent to create the TBE estate, the type and quantity of proof should be identified. Reported decisions inconsistently describe the quantum and types of evidence necessary to establish the requisite intent, with the result that the depositor can never be sure exactly what to present to the court. The court or legislature should set forth exactly what “intent” is required, e.g., an intent to establish a TBE account, an intent to create accounts “with the attributes” of the estate, etc. They also should clarify whether the ability of a spouse to withdraw funds for a purpose unrelated to the marital unit defeats a TBE estate.

The court or legislature should decide whether a husband and wife must know the legal significance of a TBE estate when the account is created. The absence of this knowledge has been important to several courts that have found that the estate was not created.

The court should resolve the issue of whether the parol evidence rule is applicable to exclude testimony by the depositors when an account expressly states that it is not an entireties account, or affirmatively states that it is something other than TBE property. Judge Harris and Judge Sharp had differing views on this issue in Beal Bank, and Florida cases are not consistent on the point.

Finally, given the number of second marriages in current society, the court or legislature should reconsider whether to insist upon straw party transactions to convert an existing account to a TBE account. Such a requirement is disingenuous given the otherwise predominant focus on the parties’ intent. Although the unities of an entireties estate are very important, the Beal Bank court elevated form over function by allowing execution on the Merrill, Lynch account solely because the wife’s name was added to a preexisting account. q

1 Bailey v. Smith, 103 So. 833 (Fla. 1925); see also English v. English, 63 So. 822 (Fla. 1913) (first Florida case to recognize that property can be owned by the entireties). For various reasons, courts and commentators have soundly criticized the TBE doctrine as applied to this type of personalty. Winters v. Parks, 91 So. 2d 649 (Fla. 1956); Preliminary Report and a Request for Guidance, memorandum from Ad-Hoc Committee on Tenancies by the Entireties to Executive Council, Business Section of The Florida Bar, June 3, 1998 (on file with the authors); Tracey K. Jaensch, Second District Court Limits the Rights of Spouses to Hold Bank Accounts as Tenants by the Entireties, 67 Fla. B.J. 41 (Feb. 1993).
2 In re Himmelstein, 203 B.R. 1009, 1012 (Bankr. M.D. Fla. 1996).
3 Barnett Bank’s signature card does not provide for ownership of the account in a TBE status. Further, the bank’s current deposit agreement states: “If you open a joint account, or if there are two or more owners on the signature card or title of the account, you agree that all funds in the account are joint property, owned by you and any co-owners of the account as joint tenants with right of survivorship. Even if Barnett changes the title of the account at your request or receives oral or written notice that you intend to treat the account funds as ‘Tenants by the Entireties,’ you agree that Barnett may treat the account like any other joint account, subject to all the terms and conditions in this agreement.. . . The entire account or any part may be withdrawn or closed by any of the co-owners, and each of you expressly appoints the other(s) to act as agent on the account. . . . ”
The Consumer Account Agreement of the Bank of Tampa has a box that the depositor may check to designate the account as “JOINT–entireties.” To further confuse matters, the deposit agreement also has a provision stating: “Joint Account – With Survivorship (And Not As Tenants In Common) – is owned by two or more persons. Each of you intend that upon your death the balance in the account. . . will belong to the survivor(s). If two or more of you survive, you will own the balance in the account as joint tenants with survivorship and not as tenants in common.”
4 Losey v. Losey, 221 So. 2d 417 (Fla. 1969).
5 First Nat. Bank v. Hector Supply Co., 254 So. 2d 777, 781 (Fla. 1971). In addition to requiring the four unities, marriage and intent, Florida now requires that, in order to establish that an automobile is TBE property, a husband and wife must take joint title by the use of the conjunctive word “and” between their names. AmSouth Bank v. Hepner, 647 So. 2d 907, 910 (Fla. 1st D.C.A. 1994); Fla. Stat. §319.22 (1997).
6 The Florida Supreme Court has suggested that banks should add a TBE as an option on their accounts. See Winters v. Parks, 91 So. 2d 649, 652 (Fla. 1956). However, this is an unrealistic request as banks have no incentive to potentially preclude the offset of available funds to satisfy a debt owed to the bank by only one of the depositors. Although a bank may state in its deposit agreement that a TBE ownership of the account is not valid as against the bank, the bank will always want to be assured of the best possible position to recover any funds in a depositor’s account if necessary to satisfy a debt owed to the bank.
7 The Barnett deposit agreement contained a provision that stated the account was held as “joint tenants with rights of survivorship and not as tenants in common or tenants by the entireties. . . . ” Beal Bank, 710 So. 2d 608, 615 n.7.
8 The Merrill, Lynch account involved the ownership of stock. Initial Brief of Appellant p.4.
9 Id. at p.1.
10 The Merrill, Lynch stock account was not exempt because Sue Almand’s name was added after her husband had established the account. Beal Bank, 710 So. 2d at 610, 616. (Harris, J. concurring in part, dissenting in part).
11 The judges presumably held the salary account exempt on the basis of the “head of family” status of Almand III. See Fla. Stat. §222.11 (1997).
12 Beal Bank, 710 So. 2d at 611 (Cobb, J. concurring in part, dissenting in part).
13 Id.; accord Terrace Bank v. Brady, 598 So. 2d 225, 228 (Fla. 2d D.C.A. 1992).
14 Beal Bank, 710 So. 2d at 616 n.2; see also Carlos A. Rodriguez, Joint Ownership Of Bank Accounts In Florida Husband And Wife: When Does A Spouse’s Interest In Account Funds Survive Their Withdrawal The Other Spouse?, 71 Fla. B.J. 26 (Jan. 1997).
15 Beal Bank, 710 So. 2d at 616 n.2. This agency theory has been used by the Florida Supreme Court to state that checks signed by both spouses are unnecessary. See Hagerty v. Hagerty, 52 So. 2d 432, 434 (Fla. 1951); In re Lyons Estate, 90 So. 2d 39, 41–42 (Fla. 1956); cf. Sitomer v. Orlan, 660 So. 2d 1111, 1113 n.1 (Fla. 4th D.C.A. 1995) (“[A] remedial statutory change would be the requirement that both bank account owners sign entireties account checks.”).
16 Beal Bank, 710 So. 2d at 617.
17 Id.; accord Terrace Bank v. Brady, 598 So. 2d 225, 229 (Fla. 2d D.C.A. 1992) (Patterson, J., dissenting) (finding intent to own account as “husband and wife” with surrounding facts sufficient to establish the estate). On this issue, Judge Harris noted that the testimony of the husbands alone was sufficient to establish the estate.
18 Beal Bank, 710 So. 2d at 614–15.
19 Id. Although the language of the account agreement was not quoted, Judge Sharp’s comments indicate that the agreement expressly required more if another form of ownership was intended.
20 Id.; accord Hurlbert v. Shackleton, 560 So. 2d 1276, 1279 (Fla. 1st D.C.A. 1990) (holding parol evidence of intent unnecessary where bonds were offered in a TBE form of ownership but husband and wife selected a joint tenancy). Without parol evidence, it is difficult to conceive of exactly what evidence Judge Sharp would allow to establish the creation of the TBE estate. Judge Harris stated that resort to the parol evidence rule was not permitted since Beal Bank was not a third-party beneficiary of the deposit agreement. Beal Bank, 710 So. 2d at 616 n.2. Judge Cobb did not address the issue as he found other defects with the accounts. The parol evidence rule and its applicability to marital bank accounts are discussed below.
21 Beal Bank, 710 So. 2d at 615.
22 Hector, 254 So. 2d at 780; see also Winters v. Parks, 91 So. 2d 649, 651–52 (Fla. 1956).
23 Although none of the Beal Bank judges stated the exact evidentiary standard to be imposed on the depositors, some courts have elevated this burden to the clear and convincing level. First Nat. Bank, 254 So. 2d at 782 (Dekle, J. concurring); Terrace Bank v. Brady, 598 So. 2d 225, 228 (Fla. 2d D.C.A. 1992).
24 See, e.g., In re Estate of Matson, 542 A.2d 147, 152–153 (Pa. Super. 1988) (requiring clear and convincing evidence to rebut presumption); Roberts & Lloyd, Inc. v. Zyblut, 691 A.2d 635, 639–40 (D.C. App. 1997) (same); In re Estate of O’Neal, 409 S.W.2d 85, 91 (Mo. 1966) (requiring proof beyond a reasonable doubt to rebut presumption); Griffin v. Prince, 632 S.W.2d 532 (Tenn. 1982). Cf. Beacon Milling Co. v. LaRose, 418 A.2d 32, 34 (Vt. 1980) (statutory protection of entireties property from individual debts can be trumped by a finding of intent not to hold the account in a TBE status remanding case for a determination of the depositors’ intent); McGuire v. Benton State Bank, 342 S.W.2d 77, 78 (Ark. 1961); Traders Travel Int’l, Inc. v. Howser, 753 P.2d 244, 246 (Haw. 1988) (statutory requirement that entireties property established only where “the tenor of the instrument [establishing the estate] manifestly indicates such intention”); Hoyle v. Hoyle, 66 A.2d 130, 132 (Del. 1949) (alluding to the intent of the depositors establishing a presumption in favor of the tenancy).
25 See Cooper v. Freer, 385 S.W.2d 340 (Mo. Ct. App. 1964); Griffin, 632 S.W.2d at 537.
26 Compare e.g., Beal Bank, 710 So. 2d at 617 (Harris, J., concurring and dissenting) (stating that testimony of husbands as to intent was sufficient) and In re Wincorp, 185 B.R. 914, 919–20 (Bankr. S.D. Fla. 1995) (stating that the debtor’s testimony alone was sufficient), with In re Stanley, 122 B.R. 599, 604 (Bankr. M.D. Fla. 1990) (stating that the court must have testimony beyond that of the debtor or the debtor’s spouse to establish intent sufficient to find property held in a TBE) and In re Koesling, 210 B.R. 487, 491 (Bankr. N.D. Fla. 1997) (same).
27 In re Richardson, 151 B.R. 613, 616 (Bankr. S.D. Fla. 1993); In re Luna, 100 B.R. 605, 606 (Bankr. S.D. Fla. 1989).
28 In re Luna, 100 B.R. at 606. To an extent, the last element of this list arguably goes to the intent of the depositors, so that the presumption is not technically a supposition that the account is TBE property.
29 In re Wincorp, Inc., 185 B.R. 914, 919 (Bankr. S.D. Fla. 1995).
30 Id. at 920 (stating that where creditor challenged claimed exemption based on debtor’s lack of understanding of the TBE estate, “[t]his argument is as persuasive as saying that because a person does not understand the specific rights provided under our Bill of Rights, he or she could not possibly be entitled to its protections. . . . ”); cf. Beal Bank, 710 So. 2d at 611 (Cobb, J., concurring and dissenting) (finding that intent to create TBE property in bank accounts could not be found where husbands did not know what the estate was when they established the accounts).
31 Sitomer v. Orlan, 660 So. 2d 1111 (Fla. 4th D.C.A. 1995); AmSouth Bank v. Hepner, 647 So. 2d 907 (Fla. 1st D.C.A. 1994).
32 Beal Bank, 710 So. 2d at 615 n.2.
33 Id.
34 Beal Bank, 710 So. 2d at 615 n.2.
35 Wickenheiser v. Ramm Vending Promotion, Inc., 560 So. 2d 350, 352 (Fla. 5th D.C.A. 1990).
36 Hamilton v. Hanks, 309 So. 2d 229, 230 (Fla. 4th D.C.A. 1975); Oper v. Air Control Products, Inc., 174 So. 2d 561, 563 (Fla. 3d D.C.A. 1965).
37 As a practical matter, however, one would imagine that a contract creditor such as Beal Bank is able to include a provision in a personal guarantee with a client, similar to that of Barnett Bank, see supra note 4, that as to the client, any funds (whether TBE property or not) can be used to satisfy any debt from a default on a mortgage and note. Why lending institutions have failed to do this is unknown.
38 Beal Bank, 710 So. 2d at 608.
39 Id. at 610.
40 Id. at 616.
41 See Fla. Stat. §689.11(1)(b) (1997).
42 Such a transfer would not satisfy the limits of time and title, as Judge Harris noted. Beal Bank, 710 So. 2d at 616; See, e.g., Hepner, 647 So. 2d at 909; cf. Winters v. Parks, 91 So. 2d 649 (Fla. 1956). In Winters, the husband had added his second wife’s name on to his signature card after they were married without establishing a new account. Apparently, because there was no challenge to the existence of the five unities, the court focused solely on the intent issue.
43 See First Nat. Bank v. Hector Supply Co., 254 So. 2d 777, 781 (Fla. 1971); Winters v. Parks, 91 So. 2d 649, 652 (Fla. 1956).

Henry T. SorensenII received his B.S. in criminology from Florida State University in 1991. Following employment in the mortgage banking business, he received his J.D., with honors, from the University of Florida in 1996. He is the founder of the Elizabeth Coryell Kline Rhile Scholarship at the University of Florida College of Law, and is a member of several committees of the Antitrust Section of the American Bar Association. Mr. Sorensen concentrates his practice in commercial litigation in Tampa.

Philip V. Martinoreceived his B.S. in business administration from the American University in Washington, D.C. in 1979 and his J.D., magna cum laude, from Syracuse University College of Law in 1982. Mr. Martino has concentrated his practice in bankruptcy and commercial litigation, and has been involved in all aspects of debtor-creditor representation and litigation. He is the co-chair of Rudnick & Wolfe’s Bankruptcy and Insolvency Practice Group, in Tampa.

This article is submitted on behalf of the Business Law Section, Stephen D. Busey, chair, T.A. Borowski, Jr., editor, and Donald A. Workman, guest editor.

Business Law