769 F.3d 366
5th Cir.2014Background
- Stanley Thaw filed Chapter 7; trustee sought to sell the couple’s jointly held residence to satisfy Stanley’s creditor (Schachar).
- Stanley and Kernell bought the home in 2009–2011, after the 2005 enactment of BAPCPA (which added 11 U.S.C. §§ 522(o) and (p)).
- Bankruptcy court found Stanley used the purchase to hinder, delay, and defraud creditors, reducing his homestead exemption to $0 under § 522(o); trustee moved to sell under 11 U.S.C. § 363.
- Kernell, the non-debtor spouse, claimed a vested homestead exemption and argued a forced sale would be a Fifth Amendment taking entitling her to compensation.
- Bankruptcy and district courts rejected Kernell’s takings claim; Fifth Circuit affirmed, holding that because the property was acquired after BAPCPA, no compensable taking occurred and § 363 sale authority stands.
Issues
| Issue | Kernell's Argument | Trustee's Argument | Held |
|---|---|---|---|
| May the bankruptcy trustee force sale of residence jointly held with a non-debtor spouse under § 363? | Sale violates non-debtor homestead rights | § 363 authorizes sale of estate property even if third parties have interests | Yes; § 363 authorizes forced sale despite non-debtor spouse’s interest |
| Does forced sale of a homestead purchased after BAPCPA constitute a Fifth Amendment taking requiring compensation to non-debtor spouse? | Kernell: sale is a taking and may be compensable despite post‑enactment acquisition; BAPCPA’s existence should be only one factor | Trustee: Rodgers and Security Industrial Bank bar takings claims for interests created after a statute’s enactment; § 363 provides protections and is not a gratuitous confiscation | No; because the property interest arose after BAPCPA, no compensable taking; sale governed by § 363 |
Key Cases Cited
- In re Kim, 748 F.3d 647 (5th Cir. 2014) (non-debtor spouse may have a homestead interest but takings protection is limited to pre‑BAPCPA acquisitions)
- United States v. Rodgers, 461 U.S. 677 (1983) (Takings Clause claims cannot be invoked for property interests created after the relevant federal statute’s enactment)
- United States v. Security Industrial Bank, 459 U.S. 70 (1982) (prospective application of bankruptcy provisions can avoid takings questions)
- Palazzolo v. Rhode Island, 533 U.S. 606 (2001) (post-enactment acquisition does not automatically foreclose takings claims in extraordinary circumstances)
- Moncrief Oil Int’l, Inc. v. OAO Gazprom, 481 F.3d 309 (5th Cir. 2007) (appellate court may affirm on any ground supported by the record)