848 F.3d 655
5th Cir.2017Background
- Jeremy and Tanya Wiggains bought a high-value Texas home in 2012, made improvements, and marketed it for sale in 2013.
- Days before receiving a $3.4M purchase offer, they recorded a Partition Agreement purporting to convert community property into separate one-half interests and gave each spouse exclusive control of their share.
- Jeremy filed Chapter 7 bankruptcy one hour after recording the Partition Agreement and claimed a homestead exemption subject to the BAPCPA cap; the Trustee later sold the house for $3.4M, netting $568,668.41, and Jeremy received a $130,675 exemption.
- Tanya (non-debtor) sued for a declaratory judgment that the Partition Agreement gave her one-half of the sale proceeds; the Trustee counterclaimed to avoid the Partition Agreement as a fraudulent transfer.
- The bankruptcy court found Jeremy’s sole intent in executing the Partition Agreement was to hinder or delay creditors, avoided the Partition Agreement under 11 U.S.C. § 548(a)(1)(A), and held Tanya was not entitled to additional distribution under 11 U.S.C. § 363(j).
- The district-court appeal was bypassed by agreement; the Fifth Circuit affirmed.
Issues
| Issue | Plaintiff's Argument (Wiggains) | Defendant's Argument (Trustee) | Held |
|---|---|---|---|
| Whether the Partition Agreement was avoidable as a fraudulent transfer under 11 U.S.C. § 548(a)(1)(A) | Jeremy argued the partition preserved Tanya’s separate homestead rights and was legitimate pre-bankruptcy planning | Trustee argued the partition was executed with actual intent to hinder or delay creditors on the eve of bankruptcy | Court held Jeremy acted with actual intent to hinder or delay creditors; Partition Agreement avoided |
| Whether the bankruptcy court clearly erred in finding intent to hinder/delay | Tanya argued the court failed to analyze context and failed to credit Jeremy’s stated benign purpose | Trustee pointed to timing, Jeremy’s admissions, and the couple’s strategy to place value beyond creditors | Court gave deference to bankruptcy factfinding and found no clear error in its intent finding |
| Whether Tanya is entitled to compensation from sale proceeds under 11 U.S.C. § 363(j) for a separate homestead interest | Tanya argued § 363(j) or constitutional takings principles entitle her to roughly half the proceeds (≈ $448k) | Trustee argued § 363(j) does not apply to Texas homestead/community-property context and BAPCPA caps control; no special circumstances of confiscation exist | Court held § 363(j) does not supply entitlement here; no Takings or other constitutional protection required compensation beyond the statutory cap; Tanya not entitled to additional distribution |
| Whether post-BAPCPA purchase creates greater notice and limits constitutional claims | Tanya implied general protections for Texas homesteads require compensation | Trustee argued post-BAPCPA purchases carry constructive notice of the statutory exemption cap and limit Takings claims | Court held purchase after BAPCPA precludes successful Takings claims for additional compensation and enforces statutory limits |
Key Cases Cited
- Shapiro v. Wilgus, 287 U.S. 348 (U.S. 1932) (a conveyance is illegal if made with intent to hinder, delay, or defraud creditors)
- In re Dennis, 330 F.3d 696 (5th Cir. 2003) (actual intent often proved by circumstantial evidence; review for clear error)
- Kim v. Dome Entm’t Ctr., Inc. (In re Kim), 748 F.3d 647 (5th Cir. 2014) (Texas homestead protects possessory rights, not vested economic rights; BAPCPA limits homestead exemptions)
- Thaw v. Moser (In re Thaw), 769 F.3d 366 (5th Cir. 2014) (post-BAPCPA homestead purchases are dispositive against Takings Clause claims; § 363 provides procedural safeguards)
- United States v. Rodgers, 461 U.S. 677 (U.S. 1983) (noting breadth of Texas homestead protection and framing Takings analysis)