## Facts

- Farmers Exchange Bank (the bank) made loans to Metro Contracting Services, Inc. (Metro), a Missouri corporation.
- Harlan R. Russell, Metro’s president, executed two promissory notes to the bank totaling about $373,000 (the Farmers notes).
- As security, Harlan signed a personal guaranty and also signed a guaranty in Rose Mary Russell’s name by forging her signature; the bank’s claims against Rose were dismissed.
- Metro defaulted, and the bank obtained summary judgment against Harlan for $372,791.47 plus interest and attorney’s fees.
- In October 2000, while Harlan and Rose were married and domiciled in Kansas, Eaton Investments, L.L.C. executed a $293,000 promissory note payable to both Harlan and Rose (the Eaton note).
- After obtaining the Missouri judgment, the bank attempted to collect by attaching and executing on Harlan’s interest in proceeds owed under the Eaton note.
- Harlan challenged the collection effort, arguing the Eaton note should be treated under Missouri law as marital property held by the entirety and therefore not reachable to satisfy a judgment against only one spouse.

## Issues

1. Which state’s law governs the characterization of Harlan and Rose’s ownership interest in the Eaton note: Missouri (the forum and place of judgment enforcement) or Kansas (their marital domicile when the note was acquired)?
2. Under the controlling law, did the Russells hold the Eaton note as tenants by the entirety (not subject to execution for one spouse’s separate debt) or as tenants in common (subject to execution as to the debtor spouse’s share)?
3. If Harlan’s interest was subject to collection, did the prejudgment attachment and later execution comply with Missouri attachment and execution requirements?
4. If the Eaton note was held in tenancy in common, did Harlan show that his ownership share was less than one-half?

## Decision

- The Missouri Court of Appeals, Western District, affirmed the trial court’s refusal to quash the prejudgment attachment and the later execution.
- The court treated the classification of the Russells’ co-ownership in the Eaton note as a property question governed by the law of the spouses’ domicile when the interest was acquired.
- Because the Russells were domiciled in Kansas when the Eaton note was made payable to them, Kansas law controlled the nature of their ownership interest.
- Applying Kansas law, the court concluded the Eaton note was held by the Russells as tenants in common, not as tenants by the entirety.
- Because Harlan held an undivided individual interest, Missouri enforcement law permitted attachment and execution against his share to satisfy the bank’s Missouri judgment.
- The court rejected Harlan’s attacks on the validity and sufficiency of the attachment and execution process.
- Harlan did not carry his burden to overcome the usual presumption of equal shares among tenants in common; execution against one-half of the note proceeds was permitted.

## Legal Principles

- The nature of spouses’ co-ownership of personal property acquired during marriage is determined by the law of their domicile at the time the property interest is acquired.
- The forum state applies its own enforcement procedures (such as attachment and execution), but those procedures operate only on whatever property interest the debtor actually has under the controlling property law.
- Property held as tenants by the entirety generally cannot be reached to satisfy a judgment against only one spouse; property held as tenants in common generally can be reached as to the debtor’s undivided share.
- In tenancy in common, equal ownership shares are generally presumed unless a party proves a different division.

## Conclusion

Because Harlan and Rose were domiciled in Kansas when they acquired the Eaton note, Kansas law governed the characterization of their rights and treated the note as owned in tenancy in common; as a result, Missouri law allowed the bank to attach and execute on Harlan’s presumed one-half interest to satisfy the Missouri judgment, and the appellate court affirmed the trial court’s orders.


Farmers Exchange Bank v. Metro Contracting Services, Inc., 107 S.W.3d 381 (2003)