As most people know, Pennsylvania recognizes the ownership concept of tenants by the entireties. That is, the assets held jointly by a husband and wife ordinarily cannot be levied and executed upon by a creditor holding a judgment against only one spouse. Assuming then that the Lender is obtaining either a Guaranty Agreement or simply having both spouses sign the Loan Documents obligating both to be liable and responsible for the debt, the Lender should be covered. Right? It depends.
In ISN Bank v. Rajaratnam, 83 A3d 170 (Pa. Super. 2013), the Superior Court held that having both spouses sign separate Guaranty Agreements is not enough to allow the Lender to execute upon, or otherwise place a lien upon property held by the Guarantors as entireties property.
In ISN Bank, the married Guarantors had both signed a 2007 Guaranty Agreement, but the husband had also signed a 2005 Guaranty. The Lender entered judgment against the husband under the 2005 Agreement, and later entered judgment against the wife under the 2007 Guaranty. The Lender then moved to consolidate the two judgments and the court denied the motion.
On appeal, the Superior Court initially found that no procedural mechanism existed to consolidate separate judgments against separate people. Substantively, the Court found that the judgments entered were pursuant to separate documents, in separate transaction and for separate considerations. In order to encumber entireties property, the judgment must be emanate from a joint debt, wherein the spouses acted together in the same transaction, incurring a joint liability. In short, draft one Guaranty Agreement with both spouses’ names and signatures, and do not forget to notarize.
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