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In re Chernushin

United States District Court, D. Colorado

January 26, 2018

In re GREGORY CHERNUSHIN, Debtor.
v.
GREGORY CHERNUSHIN, ANDREA CHERNUSHIN, THE JUDY T. COX REVOCABLE TRUST, and THE ALLEN E. COX REVOCABLE TRUST, Defendants. ROBERTSON B. COHEN, as Chapter 7 Trustee, Plaintiff,

          ORDER AFFIRMING BANKRUPTCY COURT'S DETERMINATION

          R. BROOKE JACKSON, UNITED STATES DISTRICT JUDGE.

         This matter is before the Court on Robertson B. Cohen's (“the Trustee”) appeal from the judgment of the Bankruptcy Court, which determined that property owned by now-deceased Gregory Chernushin (“the Debtor”) is not part of the Debtor's bankruptcy estate but instead is owned by Defendant Andrea Chernushin free of the interest of others. This Court exercises jurisdiction over the appeal pursuant to 28 U.S.C. §§ 1334(a) and 158(a)(1). The Court has reviewed the record and the parties' briefs. For the reasons set forth below, the Bankruptcy Court's judgment is AFFIRMED.

         BACKGROUND

         The following facts are undisputed. On August 17, 2015 the Debtor filed a voluntary Chapter 13 bankruptcy petition. ECF No. 7-1 at 54. His wife, Mrs. Andrea Chernushin, neither joined his petition nor filed her own. At the time of his bankruptcy filing, the Debtor owned a vacation property located in Crested Butte, Colorado (“the Property”). The Debtor and Mrs. Chernushin owned the Property in joint tenancy with the right of survivorship. Pursuant to 11 U.S.C. § 541, the Debtor's interest in the Property became part of his bankruptcy estate when he filed for bankruptcy.

         On October 2, 2015 the Court converted the Debtor's case to one under Chapter 7 of the Bankruptcy Code and the Trustee was appointed. On either June 8 or June 9, 2016 the Debtor died, but his death did not affect the progression of the bankruptcy case pursuant to Fed.R.Bankr.P. 1016. Days later, on June 15, 2016, the Trustee filed an adversary proceeding against the Debtor, Mrs. Chernushin, and two secured creditors in an effort to sell the Property. Mrs. Chernushin filed an answer in which she asserted that the Debtor's interest in the Property was terminated by operation of law on the day that he died, and therefore the Property was no longer part of the bankruptcy estate. Both parties filed motions for summary judgment on the issue. ECF No. 7-1 at 54. In an April 3, 2017 order, the United States Bankruptcy Court for the District of Colorado granted Mrs. Chernushin's motion for summary judgment and determined that:

the Debtor's interest in the Property remained in joint tenancy, with its accompanying right of survivorship, until the time of his death. At the time of his death, the Debtor's interest in the Property terminated. The Defendant [Mrs. Chernushin] now owns the Property free of any interest of the Debtor. The Property is not property of the Debtor's bankruptcy estate, and the Trustee is not entitled to sell it.

Id. The Bankruptcy Court thus entered judgment for Mrs. Chernushin and dismissed the adversary proceeding. Id. On May 3, 2017 the Trustee filed an appeal of the Bankruptcy Court's decision. The issues have been fully briefed and are ripe for this Court's review.

         ANALYSIS

         A. Standard of Review.

         This Court reviews the Bankruptcy Court's legal determinations de novo. See In re Baldwin, 593 F.3d 1155, 1159 (10th Cir. 2010). The Court also reviews de novo mixed questions of law and fact that primarily involve legal issues. See In re Wes Dor Inc., 996 F.2d 237 (10th Cir. 1993). The Bankruptcy Court's factual findings are reviewed for clear error. See In re Johnson, 477 B.R. 156, 168 (10th Cir. BAP 2012). If a “lower court's factual findings are premised on improper legal standards or on proper ones improperly applied, they are not entitled to the protection of the clearly erroneous standard, but are subject to de novo review.” Id.

         Because the Trustee's appeal is premised on his argument that the Bankruptcy Court improperly applied the law, I will review the Bankruptcy Court's decision de novo. See In re Baldwin, 593 F.3d at 1159.

         B. Trustee's Arguments.

         The Trustee makes three arguments on appeal, but they boil down to one basic assertion: the Bankruptcy Court ignored federal law when it ruled that the Property was removed from the bankruptcy estate upon the death of the Debtor. ECF No. 9.[1] The Bankruptcy Court made its determination based upon Colorado joint tenancy law, as codified in C.R.S. § 38-31-101. ECF No. 7-1. The Trustee alleges that the Bankruptcy Court “ignored the Supremacy Clause of the United States and 11 U.S.C. § 541” and other provisions of the Bankruptcy Code in making this decision, and the Trustee argues that had the Bankruptcy Court properly applied federal law it would have ruled in the Trustee's favor. Id. After reviewing the briefs and relevant law, I AFFIRM the Bankruptcy Court's grant of summary judgment and determination that the Property is no longer part of the bankruptcy estate. My reasoning is explained below.

         The Debtor and Mrs. Chernushin owned the Property as joint tenants. “[J]oint tenancy is a form of ownership in which each joint tenant possesses the entire estate, rather than a fractional share.” Taylor v. Canterbury, 92 P.3d 961, 964 (Colo. 2004). When a joint tenant dies, his or her interest in the property is terminated, and the surviving joint tenant's interest in the property continues free of the deceased joint tenant's interest. C.R.S. § 38-31-101(6)(c). Jointly held property remains in a joint tenancy unless that joint tenancy is severed. Taylor, 92 P.3d at 964. The filing of the bankruptcy petition did not sever the joint tenancy, C.R.S. § 38-31-101(5)(b) and here neither party makes any other argument that severance occurred.[2] Therefore, the parties concur that ...


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