We are asked to decide when a transfer is to be deemed “made” for the purposes of 11 U.S.C. § 727(a)(2), which denies discharge to a debtor who transfers property with the “intent to hinder, delay, or defraud” within one year of filing his petition in Bankruptcy Court. We hold that a transfer is “made” once it is effective as between the parties to the transfer.
I.
Steven and Judy Roosevelt, a married couple, purchased a house on Green Oak Lane in Glendora, California (hereinafter “Glendora property”) on August 9, 1984, and took title as joint tenants. On June 10,1989, when the Roosevelts were having marital difficulties, they signed and executed a Marital Agreement. The Agreement divided all of the couple’s community property and specifically provided that the Glendora property would be transmuted into Judy’s separate property. The Bankruptcy Appellate Panel determined that Steven made this transfer with the “intent to hinder, delay, or defraud” his creditors.
Notwithstanding Steven’s June 1989 transfer of his interest in the Glendora property, he joined Judy in executing two deeds of trust on the property on December 18, 1989-the first in favor of Frances Miles in exchange for $56,000 and the second in favor of Raymond Jensen in exchange for $56,000. On March 13, 1990, Steven and Judy filed a homestead declaration, thereby protecting a portion of their equity in the Glendora property from creditors.
In March 1990, Finalco Corp. sued Judy and Steven in an unrelated action and was awarded a $150,000 judgment against Steven. Steven filed for Chapter 7 bankruptcy on November 9, 1990. Finalco instituted an adversary proceeding contesting Steven’s discharge under § 727(a)(2) on the ground that he transferred the Glendora property within one year of his petition for bankruptcy with the “intent to hinder, delay, or defraud” his creditors. Specifically, Finalco argued that: (1) the June 1989 Marital Agreement was ineffective under California law (so that Steven did not actually transfer any interest in the Glendora property until he executed the December 1989 deeds of trust); (2) even if the Marital Agreement was a valid transfer, such a transfer is not deemed “made” under § 727(a)(2) until it is recorded (so that the transfer of the property under the Marital Agreement was not “made” until Judy recorded the quitclaim deed in April 1990); and (3) even if § 727(a)(2) deemed a transfer “made” once the Marital Agreement was executed, Steven nevertheless retained an interest in the Glendora property which he subsequently transferred within § 727(a)(2)’s one-year reach-back period.
On October 11, 1993, the Bankruptcy Court rejected Finalco’s arguments, denied
We have jurisdiction over an appeal from the Bankruptcy Appellate Panel under 28 U.S.C. § 158(d). On such appeals, we conduct an independent review of the Bankruptcy Court’s decision. In re Pace,
II.
Finalco first argues that the 1989 Marital Agreement did not transfer the Glendora property from Steven to Judy. If this were true, our review would end and we would be compelled to reverse because Steven would not have transferred the property until he executed the deeds of trust in December 1989-a transfer well within § 727(a)(2)’s one-year reach-back period.
Because the validity of the Marital Agreement determines the extent of Steven’s rights in the Glendora property, and because we look to state law in determining property rights, we must use state law to evaluate the validity of the Agreement. See Butner v. United States,
Under these standards, the Marital Agreement was a valid transmutation.
STEVEN and JUDY agree that all property set forth in Exhibit D and any property hereafter acquired by JUDY during the marriage by any means including but not limited to purchase, gift, bequest, devise, or descent shall be and remain her separate property.
Marital Agreement, ¶ 7(b) (emphasis added). Exhibit D listed the Glendora property. Thus, the Agreement acknowledged that Steven had an interest in the Glendora property and then declared the property to be Judy’s separate property. The Agreement “contains language expressly stating that the ownership of the property is being changed” and was therefore a valid transfer of the Glendora property as between Steven and Judy.
III.
Finalco contends that, even if the Marital. Agreement was valid between Steven and Judy, that discharge was still improperly denied because § 727(a)(2) does not deem a transfer “made” until it is recorded — which in this case was within one year of when Steven filed his bankruptcy petition. The question of when a transfer is “made” is a question of federal law, subject to our de novo review. In re Schuman,
We start, as always, with the plain language of the statute. Section 727(a)(2) provides that:
The eoui’t shall grant the debtor a discharge, unless ... the debtor, with intent to hinder, delay, or defraud a creditor or an officer of the estate charged with custody of property under this title, has transferred, removed, destroyed, mutilated, or concealed, or has permitted to be transferred, removed, destroyed, mutilated, orconcealed ... property of the debtor, within one year before the date of the filing of the petition....
11 U.S.C. § 727(a)(2)(A). Nowhere does the statute define when a transfer is “made.” See Matter of Kock,
Nor does § 727(a)(2)’s legislative history clarify the statute’s silence. While Congress has expressly specified when a transfer is to be deemed “made” for other provisions of the Bankruptcy Code,
The second rule, which the BAP adopted here, and which Steven urges us to adopt, deems a transfer “made” for the purposes of § 727(a)(2) once it is effective between the parties to the transfer, whether or not it is valid as against bona fide purchasers. See Matter of Koch,
Our Circuit has not yet adopted either rule, so we are squarely faced with an issue of first impression. Finalco proffers three reasons why we should adopt the BFP rule. It first observes that both § 727(a)(2) and § 548 of the Code involve situations where the debtor has transferred his property with the intent to hinder, delay, or defraud his creditors. Compare 11 U.S.C. § 727(a)(2) with 11 U.S.C. § 548(a)(1).
Steven responds that drawing an analogy between these two provisions solely on the basis of their similar language is a mistake because they serve different purposes that require different timing rules. Section 727(a)(2), he notes, “eenter[s] on the debtor’s wrongdoing in or in connection with the bankruptcy case.” S.Rep. No. 989, 95th Cong., 2d Sess. 98 (1978), reprinted in 1978 U.S.C.C.A.N. 5787, 5884. Section 548, he contrasts, gives the bankruptcy trustee the power to avoid transactions and bring them back into the debtor’s estate, a power that is not limited to situations where the debtor acted with the intent to defraud. See 11 U.S.C. § 548(a)(2) (allowing avoidance of transfers because they were made for less than “reasonably equivalent value”).
as the means of accomplishing its purpose, Section 727(a)(2), on the other hand:
premises denial of discharge on certain conduct of the debtor in relation to his assets and creditors if done with “intent to hinder, delay or defraud.” Thus, one of the principal points of focus in litigation involving that sub-section involves certain conduct coupled with an appropriate guilty state of mind. That suggests to me that the “transfer” which is contemplated by § 727(a)(2) focuses on the time of the debt- or’s activity and not when the activity is somehow fully-insulated from the claims of other creditors.
Matter of Kock,
Finalco argues that, even if we are not persuaded to adopt the BFP rule for § 727(a)(2) because it is used in § 548, we should nevertheless adopt it because it is more practical. By focusing on when a transfer is recorded — an event with a verifiable paper trial — courts can avoid evidentiary disputes over when deeds were executed or agreements signed. In re MacQuown,
Finally, Finaleo opines that the BFP rule would encourage debtors to disclose their transfers, thereby preventing a dishonest debtor from concealing a fraudulent transfer for more than a year in order to avoid § 727(a)(2)’s one-year reachback. Finalco’s concern is misplaced. Section 727(a)(2) already denies discharge to a debtor who conceals his property with the intent to hinder, delay, or defraud. See § 727(a)(2)(A). Thus, courts following the “party rule” would not discharge a debtor who failed to record if he did so for the purpose of concealing the transfer. See 4 Collier ¶ 727.02[2], at 727-14, -15 (“Under [the “party rule”], it must be recognized that some failures to record transfers are intentional and are in the nature of continuing concealments, in which case the date of recordation should be used to determine whether the transfer occurred during the one-year period.”).
Steven offers two reasons why we should adopt the “party rule.” He first observes that courts are to construe “the provisions denying a discharge to a debtor ... liberally in favor of the debtor and strictly against the creditor.” In re Weldon,
While we are not terribly moved by Steven’s second argument, we believe that § 727(a)(2) focuses on the debtor’s wrongdoing and that the “party rule” is more tailored to serving that goal than the “BFP rule.”
IV.
Finaleo argues that it should prevail even if Steven transferred the Glendora property more than one year before he filed his bankruptcy petition because Steven retained an interest in the Glendora property when he executed the Martial Agreement; that interest, Finaleo asserts, is what Steven transferred when he executed the two deeds of trust in December 1989, when he filed a homestead declaration in March 1990, and
We cannot agree. Steven certainly did not retain any interest in the property through the Marital Agreement. Paragraph 10 stated that:
STEVEN and JUDY agree that each party waives and relinquishes, to the fullest extent lawfully possible, all right, title, claim, lien or interest ... in the other’s separate property ...
The deeds and declarations Steven subsequently executed also do not support Final-co’s contention that Steven retained any interest in the property. The quitclaim deed executed in April 1990, which by its very definition can only convey whatever interest the grantor has in property (including no interest), is not inconsistent with Steven’s prior surrender of his interest in the Glendora property. Nor did Steven, via the execution of the deeds of trust or filing of the homestead declaration, take back any interest in the property; even if we somehow construed these documents as an attempted re-transmutation of the Glendora property back into community property, the attempt failed because neither document included language “expressly statfing] that the characterization or ownership of the property is being changed.” In re Estate of MacDonald,
Thus, the only possible interest that Steven could have retained in the Glendora property is one that arises automatically in every California real property transaction: A continuing ability to deal with the property in bad faith, and pit subsequent purchasers against one another. Although, under California law, a conveyance of real estate is valid between the grantor and grantee even if unrecorded, see Cal. Civ.Code § 1217, that conveyance is void as against subsequent bona fide purchasers who record before the original grantee does. See Cal. Civ.Code § 1214. Thus, if a grantor conveys real estate and the grantee does not record the transfer, the grantor retains the ability to reconvey the real estate to a bona fide purchaser, who can defeat the initial grantee’s interest if she records before the grantee does. This is the interest that Finalco asserts that Steven retained after he executed but did not record the Marital Agreement.
Whether or not Steven’s ability to give a subsequent bona fide purchaser the right to defeat the initial grantee’s interest may be an “interest,” it must also be an interest in property for it to be subject to a “transfer” under the Bankruptcy Code. Section 101(54) defines a transfer as:
every mode, direct or indirect, absolute or conditional, voluntary or involuntary, of disposing of or parting with property or with an interest in property, including retention of title as a security interest and foreclosure of the debtor’s equity of redemption.
11 U.S.C. § 101(54) (emphasis added). Although this definition is to be construed broadly, In re FBN Food Services, Inc.,
Whether a property interest exists is a matter of state law. See In re Harrell,
Moreover, that this so-called “interest” exists at all is a quirk of the recording statutes themselves. These statutes are designed to assign priorities among competing stakeholders in a piece of property. They are not designed to create a property interest in a dishonest grantor who can continue to give away the same piece of property until one of his buyers records the transaction. Thus, as a matter of policy as well, we reject Finalco’s argument that Steven retained a property interest in the Glendora property after he executed the Marital Agreement.
V.
For the foregoing reasons, we AFFIRM the decision of the Bankruptcy Appellate Panel granting Steven a discharge of his debts.
Notes
. See Cal.Civ.Proc.Code §§ 704.710 et seq.
. While some cases review the denial of discharge under a purportedly different standard— reviewing findings of fact for clear error and reviewing conclusions of law de novo, see, e.g., In re Devers,
. "Subject to Sections 851 to 853, inclusive, married persons may by agreement or transfer, with or without consideration ... [tjransmute community property to separate property of either spouse.” Cal. Fam.Code § 850(a).
. While a transmutation of real property is not valid as against third parties until it is recorded, see Cal. Fam.Code § 852(b), the validity of the Marital Agreement as against third parties is irrelevant to Finalco's contention that the Agreement is invalid between Steven and Judy.
. It is unclear whether a transmutation of real property must satisfy both the specific requirements for transmutations and the more general requirements for transfers of real property.
Under California law, a transfer of real property is valid only if: (1) the grantor signs the instrument conveying the property, see Cal. Civ. Code § 1091 ("An estate in real property ... can be transferred only by operation of law, or by an instrument in writing, subscribed by the party disposing of the same ... ”); and (2) the instrument is delivered to the grantee, see Cal. Civ.
Even if we assume that the delivery requirement applies, we believe it was satisfied in this case despite the record’s silence as to whether the Marital Agreement was actually delivered to Judy. Delivery may be presumed where, as here, no conflicting evidence exists. See Cal. Civ.Code § 1055 ("A grant duly executed is presumed to have been delivered at its date."). Alternatively, an instrument is deemed constructively delivered if the grantor so intended. See Cal. Civ.Code § 1059 (permitting constructive delivery if the instrument "is, by the agreement of the parties at the time of execution, understood to be delivered ...”); see also McCarthy v. McCarthy,
. That Steven lived in the house after its transmutation is irrelevant. See Ogg v. Gunderson,
. A few courts have erroneously looked to state law to see when a transfer is valid against third parties without first deciding the previous question of what type of validity — as between the parties or as against bona fide purchasers — is required by federal law. See, e.g., In re Ingersoll,
. See Amendments to Bankruptcy Act of 1898, ch. 487, § 13, 32 Stat. 797, 799-800 (1903) (deeming a transfer "made” at the time it was recorded for the purposes of preferential transfers); Bankruptcy Act of 1938, Amendments, ch. 575, § 67(d)(5), 52 Stat. 840, 878 (1938) (deeming a transfer "made" at the time it was recorded for the purposes of fraudulent transfers).
. We will not trace the language in § 14(c)(4) to § 3(a)(1) of the Bankruptcy Act of 1898, because § 3(a)(1) was wholly unrelated to denials of discharge. See Bankruptcy Act of 1898, ch. 541, § 3(a), 30 Stat. 544, 546 (1898). We do not believe that the similarity of the words in §§ 3(a)(1) and 14(c)(4) can trump the dissimilarity of the purposes those words were attempting to accomplish: Section 3(a)(1) defined the grounds for involuntary bankruptcy and § 14(c)(4) defined the grounds for denial of discharge.
. In relevant part, § 548(a)(1) provides: “The trustee may avoid any transfer of an interest of the debtor in property ... that was made or incurred on or within one year before the date of the filing of the petition, if the debtor voluntarily or involuntary ... made such transfer ... with actual intent to hinder, delay, or defraud ...” Id.
. Section 548(d)(1) states:
For the purposes of this section, a transfer is made when such transfer is so perfected that a bona fide purchaser from the debtor against whom applicable law permits such transfer to be perfected cannot acquire an interest in the property transferred that is superior to the interest in such property of the transferee, but if such transfer is not so perfected before the commencement of the case, such transfer is made immediately before the date of the filing of the petition.
11 U.S.C. § 548(d)(1).
.We recognize that serving one of these two goals often advances the other. A denial of discharge, even when aimed at punishing the debt- or, has the effect of protecting creditors. By the same token, some of the trustee's avoidance powers under i 548 are invoked by the debtor’s wrongdoing. But see 11 U.S.C. § 548(a)(2). We are, however, more concerned with the primary purposes of the two statutes, not their incidental effects.
. Concealment is not an issue in this case, as it was never argued to the Bankruptcy Court.
. Finaleo argues that this holding will create a split in the federal Circuit courts. The Third Circuit purported to hold, in MacQuown,