Skip Navigation
  • Robocall Hotline:(844)-8-NO-ROBO
  • All Other Complaints:(877)-5-NO-SCAM
  • Outside NC:919-716-6000
  • En Español:919-716-0058

Federal Forfeiture of Property held Through an Estate by the Entirety

June 28, 1993

B. Frederic Williams Jr. Assistant United States Attorney Room 221, Charles R. Jones Federal Building 401 West Trade Street Charlotte, North Carolina 28202

Re: Advisory Opinion — Federal Forfeiture of Property held Through an Estate by the Entirety; Use of the State RICO Act to Covert Entirety Property to a Tenancy in Common.

Dear Mr. Williams:

You state the United States Attorney for the Western District of North Carolina has initiated at least three forfeiture actions against real property held in tenancy by the entirety in which it is possible only one spouse has used the property in manner prohibited by federal law. You note that in each case the legal basis for federal forfeiture also is cognizable under the North Carolina Racketeer Influenced and Corrupt Organizations (RICO) Act, G.S. 75D-1 et seq., and would justify the property’s forfeiture under state law. You ask whether the United States, in prosecuting the federal forfeiture actions, may utilize a provision of the North Carolina RICO Act which operates automatically upon judgement of forfeiture to convert property held in an estate by the entirety to a tenancy in common or, whether the United States must initiate an independent action to convert the property and forfeit the offending spouse’s interest.

Under North Carolina common law, an estate by the entirety is a form of co-ownership held by husband and wife with right of survivorship. Davis v. Bass, 188 N.C. 200, 124 S.E. 566 (1924). It arises by virtue of title acquired by husband and wife jointly after their marriage. Jernigan v. Stokley, 34 N.C. App. 358, 238 S.E. 2d 318 (1977). An estate by the entirety is based on the fiction that upon marriage the husband and wife constitute a legal entity separate and distinct from each’s individual status. Combs v. Combs, 273 N.C. 462,160 S.E. 2d 308 (1968). Each spouse is deemed to be seized of the entire estate, with neither spouse having a separate or undivided interest therein. Boyce v. Boyce, 60 N.C. App. 685, 299 S.E. 2d 805 (1983) review denied 308 N.C.190, 302 S.E. 2d 242 (1983).

In North Carolina, the estate by the entirety generally exists only in realty. Turlington v. Lucas, 186 N.C. 283,119 S.E.366 (1923). It is not recognized in personal property.

Lovel v. Insurance Co., 302 N.C. 150, 274 S.E. 2d 170 (1981); Bowling v. Bowling, 243 N.C. 515, 91 S.E. 2d 176 (1956). Therefore, nothing else appearing, cash proceeds from a voluntary sale or transfer of real property owned by husband and wife by the entirety become personalty held in tenancy in common. Shores v. Rabon, 251 N.C. 790, 112 S.E. 2d 556 (1960); Honeycutt

v. Citizens National Bank, 242 N.C. 734, 89 S.E. 2d 598 (1955); Wilson v. Ervin, 227 N.C. 396, 42 S.E. 2d 468 (1947). However, where entirety property is sold or transferred involuntarily, the resulting cash proceeds retain the characteristics of entirety property. In re Foreclosure of Deed of Trust, 303 N.C. 514, 279 S.E. 2d 566 (1981), Highway Commission v. Myers, 270 N.C. 258, 154

S.E. 2d 87 (1967). The significance of these principles to the question posed is that under the common law entirety property may not be charged with debts or judgments incurred as the result of the acts of only one spouse while property held by spouses as tenants in common may be charged with individual debts or judgements. North Carolina National Bank v. Corbett, 271 N.C. 444, 156 S.E. 2d 835 (1967); Air Conditioning Company v. Douglas, 241 N.C. 170, 84 S.E. 2d 828 (1954); Davis v. Bass, supra.

The North Carolina RICO Act authorizes forfeiture of "[a]ll property of every kind used or intended to be used in the course of, derived from or realized through a racketeering activity or pattern of racketeering activity…." G.S. 75D-5(a). "Racketeering activity’…includes the description in Title 18, United States Code, Section 1961(1)" (defining "racketeering activity" under federal law). G.S. 75D-3(c)(2). The RICO Act further provides:

[w]here property is held by the entirety and one spouse is an innocent person…, upon entry of a final judgement of forfeiture of entirety property, the judgement operates to convert the entirety to a tenancy in common, and only the one-half undivided interest of the offending spouse shall be forfeited according to the provisions of this Chapter.

G.S. 75D-8(a)(1). Clearly, forfeiture of entirety property based upon its use by only one spouse in violation of the RICO Act is, at least for the innocent spouse, in violation of the RICO Act is, at least for the innocent spouse, an involuntary transfer. Therefore, the provisions of G.S. 75D8(a)(1), providing for automatic conversion of forfeited property held by the entirety to a tenancy in common are in derogation of the common law.

The clear legislative intent of G.S. 75D-8(a)(1) is to authorize and facilitate the forfeiture of an offending spouse’s interest in entirety property while protecting the innocent spouse’s interest. To the extent the General Assembly’s will to treat forfeited entirety property in the manner expressed in G.S. 75D-8(a)(1) conflicts with the common law principles explained above, the common law is abrogated. Therefore, we conclude that where entirety property is subject to forfeiture based upon its use by one spouse in a manner prohibited by the North Carolina RICO Act, including violations of federal law incorporated into the Act, G.S. 75D-8(a)(1) supplants the State’s common law rule prohibiting entirety property from being charged with debts or judgments resulting from the actions of only one spouse. It is the Attorney General’s further opinion that the State’s common law rule which maintains and continues the entirety status of involuntarily transferred property is abrogated and replaced with a statutory requirement that property forfeited under the RICO Act or the proceeds from its sale automatically be converted to a tenancy in common from which the forfeiture judgment may be satisfied. Whether a federal court has the duty or authority to follow this modification of state property law in federal forfeiture proceedings is a question upon which this office cannot and should not render an opinion.

Should the United States Attorney decide not to utilize the North Carolina RICO Act’s conversion provision in the pending forfeiture actions or, should the federal court determine it is not bound to accept the modifications to the common law made therein, the North Carolina Attorney General stands ready to evaluate the investigations upon which the prosecutions are based and, in appropriate cases, consider initiating state RICO forfeiture actions against the property.

Edwin M. Speas, Jr.

Senior Deputy Attorney General

W. Dale Talbert Special Deputy Attorney General