New Jersey Law Prevents Judgment Creditors From Forcing Sale of Jointly Held Real Estate Unless Judgment Is Against Both Property Owners

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This question frequently arises in the context of consulting with married couples who own jointly held real estate and a creditor has obtained a civil money judgment against only one of them.  The most typical example is when either the husband or wife personally guarantees a business debt, the business ultimately fails or the husband or wife defaults on the loan, and the creditor files suit and recovers a judgment on the personal guaranty.   Under New Jersey law can the judgment creditor of one spouse compel a court to order the sale of their jointly held marital residence?  

The short answer is "no," provided that the non-debtor spouse survives the debtor spouse.  When the debtor spouse passes away, the creditor's judgment goes to the grave with him/her and the surviving spouse holds the marital residence free and clear of the judgment.  

However, during the lifetime of the debtor spouse the judgment creditor is still permitted to levy and execute against the debtor spouse's right of survivorship and his/her life estate.  Should the non-debtor spouse  predecease the debtor spouse, then the judgment creditor will take ownership of the property vis-a-vis ownership of the debtor spouse’s right of survivorship. 

“A tenancy by the entirety is an estate held by husband and wife by virtue of title acquired by them jointly after marriage.”   Dorf v. Tuscadora Pipe Line Co., 48 N.J. Super. 26, 31 (1957).  “The tenancy is the creature of common law, created by legal fiction and based wholly on the common law doctrine that husband and wife are one.  Id.  Under New Jersey law, tenants by the entireties have certain specific rights.  For example, tenants by the entireties each hold their estate as tenants in common for their joint lives  subject to each spouse’s right of survivorship against one another.  Upon the death of one of the spouses, the surviving spouse becomes the sole owner.  In the Matter of Horace G. Houghton, 75 N.J. 462 (1978).

What About Splitting The House in Half?   

So long as the non-debtor spouse does not predecease the debtor spouse, the judgment creditor cannot force a sale of the home by exercise of the remedy of partition, i.e., physically splitting the house in half and selling the debtor spouse’s half.  Under New Jersey law, there may not be a partition with respect to lands held as tenants by the entirety.  See Newman v. Chase, 70 N.J. 254, 260 (1976).  See also Dvorken v. Barrett, 100 N.J. Super. 306, 309 (App. Div. 1968) (court has no power to order sale of property free of  wife’s entirety interest); Citizens First National Bank of Ridgewood v. Grull, 122 N.J.Super. 562 (Ch. Div.1973) (levying creditor who had judgment against a tenant by the entirety could not compel a partition of the fee by sale or otherwise which would destroy the wife’s common law right of survivorship). 

In King v. Greene, 30 N.J. 395, 412 (1959), the judgment creditor of the debtor spouse was allowed to levy and sell that spouse’s right of survivorship and his one-half (1/2) interest in the life estate for their joint lives.  Such a sale, however, remains subject to the survivorship interest of the non-debtor spouse.  Dvorken, 100 N.J. at 266.  See also Freda v. Commercial Trust Co. of N.J., 118 N.J. 36 (1990) (a mortgage given by one tenant was deemed only to encumber that tenants interest where the mortgaged property was held as a tenancy by the entirety).  In other words, a judgment creditor levying against the debtor spouse acquires no greater rights then that spouse had - which is one-half interest in life estate for their joint lives and debtor spouse’s right of survivorship.  Guttermuth v. Ropiecki, 59 N.J. Super. 139, 142 (Ch. Div. 1977).

However, none of the above applies if the creditor has recovered a judgment against both the husband and wife.