ARGUMENT
6. On Schedule C to his Petition, the Debtor claims property described as “Maxim Joint Account – Acct. # ****3675 – TBE” (the “Account”) as exempt on the basis that it is held as tenancy by the entireties property. The Account contains, among other things, 310 Holdings / JBI Inc. stock (the “Stock”) which is held by the Debtor and his spouse as tenancy by the entireties property. The Trustee fails to rebut the presumption that the Stock is held in an estate by the entireties by a preponderance of the evidence.
7. In sum, the Trustee objects to the Debtor’s claim of exemption as to the Stock on the grounds that it was allegedly provided to the Debtor by Domark International (“Domark”) in sole consideration of a debt owed to the Debtor by Domark. The Trustee argues that Domark provided the Stock to the Debtor in satisfaction of a debt owed to him; and, that the Debtor in turn constructively transferred the Stock to himself and his spouse to be held in an estate by the entireties. The Trustee claims that the constructive transfer of the Stock constitutes a “fraudulent asset conversion”. The Trustee relies exclusively on three regulatory filings with the Securities Exchange Commission as supporting evidence.
8. Had the Trustee investigated beyond the mere written content of the regulatory filings, he would have quickly discovered that the Stock was not provided in satisfaction of a debt owed to the Debtor by Domark.1 In fact, any indebtedness to the Debtor was both nominal in amount and disputed, and was fully settled by the Domark payment of the $150,000.00. See Sieck affidavit, ¶4.
9. As is the case in all agreements, there must be mutual consideration. As to the debt settlement portion of the agreement, the Debtor received full consideration from the $150,000 cash proceeds for the indebtedness he claimed to exist. The debt having been thus fully satisfied, the parties then exchanged the 111,438,394.00 shares of Domark stock, owned by the Debtor and his wife in tenancy by entireties, for 3,500,000.00 shares of 310 Holdings stock then owned by Domark. The Trustee's assertion that the Stock was being provided to the Debtor, along with the $150,000, to satisfy its indebtedness to him, begs the obvious question: Why did the Debtor and his spouse simultaneously transfer 111,438,394.00 shares of Domark stock back to Domark? As confirmed by Mr. Sieck’s affidavit, the answer is that the Debtor and his spouse agreed to divest themselves of any Domark ownership so that the Debtor and his spouse would no longer have controlling interest in Domark. See Sieck affidavit, ¶4. To accomplish that divestiture, the Debtor and his wife provided their Domark stock (held TBE) to Domark in exchange for 310 Holdings stock (also to be held TBE). See Sieck affidavit, ¶5. The Trustee’s premise that the Stock was to go the Debtor in satisfaction of its indebtedness to him is without any support in law or fact.
10. The Trustee has conducted no formal discovery in this matter, has filed his objection without conducting a reasonable investigation into the basic facts of the case, and has overlooked many essential facts which validate the claimed ownership of the Stock as TBE property. One, the affidavit and testimony of Scott Sieck, then CEO of Domark, clearly will establish that the stock exchange was an integral part of the settlement agreement entered into between the Debtor and Domark. Two, Sieck’s affidavit asserts, and his testimony clearly will establish, that the value of the stock exchanged between Domark and the Debtor and his spouse was grossly incongruent to any amount of money owed by Domark to the Debtor.
11. The Trustee solely points to one 8-K and two 13-D Securities Exchange Commission filings to form the basis of their argument. The Trustee argues the Debtor is the true owner of the Stock, given that the regulatory filings contain statements made by the Debtor that he “has the sole power to vote and dispose” of the Stock. Irrespective of the misstatements of the Debtor in any filing, he did not and does not have the sole right to the Stock. Such statements ignore the fact that the Debtor’s spouse agreed to the stock exchange agreement whereby the stock transfer would occur in order to divest the Debtor and his spouse of any controlling ownership interest in Domark. The Trustee also ignores the Debtor’s subsequent amended SEC filing wherein he precisely states that the Domark stock exchanged for the 310 Holdings was owned by Tom Kidd and Joan Kidd as tenants by entirety, so as to avoid any confusion.
12. Pursuant to that agreement, the Stock was provided to the Debtor and his spouse, to be held in an estate by the entireties, in exchange for their Domark stock, also held in an estate by the entireties. Despite any statements of the Debtor which have been interpreted by the Trustee to the contrary, the Debtor does not have sole ownership of the Stock. The Debtor and his wife merely exchanged one tenancy by entirety asset for another. As such, the ownership of the entireties asset cannot be divested without the mutual consent of the co-tenants. A tenancy by entirety estate cannot be sold, forfeited or encumbered without consent of the other, nor can one spouse alone lease it or contract for its disposition. Parrish, 379 So.2d at 186.
13. Moreover, filings with the Securities Exchange Commission are not dispositive as to the contract entered into between the parties. They merely provide a brief synopsis of contractual happenings for the purpose of public reporting. Regardless of what was stated in those filings, such declarations by the Debtor can neither create nor alienate an ownership interest. Ownership is established by the true substance of the transactions along with the documents of title, which here consist of the actual stock The Trustee’s interpretations of the Securities Exchange Commission filings do not provide a picture of the agreement that existed between the Debtor and Domark. certificates.[2]
14. The Trustee has failed to rebut the presumption in favor of finding the Stock is held in a tenancy by entirety estate. The Stock (held in an entireties estate) was received from Domark in consideration of an agreement whereby the Debtor and his spouse provided their Domark stock (also held in an entireties estate) to effectuate a stock exchange. As to the Stock, the five unities of possession, interest, title, time, and survivorship have always been present.
[2] Copies of all of the relevant stock certificates and the transfer agent records, all showing tenancy by entireties ownership, have been previously provided to the Trustee.
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