from the United States Bankruptcy Court for the Northern
District of Texas
JOLLY, BARKSDALE, and SOUTHWICK, Circuit Judges.
H. SOUTHWICK, Circuit Judge:
bankruptcy court held that an agreement between the debtor
and his spouse that partitioned their homestead property was
a fraudulent transfer. Consequently, the non-debtor spouse
had no interest in the proceeds from the sale of the
homestead. This court granted the parties' joint request
to permit an appeal directly to this court. We AFFIRM.
AND PROCEDURAL BACKGROUND
Wiggains and his wife Tanya, married since 2007, purchased an
expensive home in an exclusive Dallas suburb in late 2012.
During their brief residency, the couple made valuable
improvements as part of their investment strategy to increase
profits from a future sale of the home.
summer of 2013, the Wiggainses began marketing their home. In
August 2013, they signed a sales contract for $3.4 million. A
few days before they received the purchase offer, two
significant events occurred. First, the Wiggainses, upon the
advice of counsel, executed and filed a "Partition
Agreement, " which sought to recharacterize their home
from community property to separate property, one half
belonging to each spouse. The Partition Agreement further
provided that each spouse would have "sole and exclusive
authority, management, and control of their separate
property. . . ."
Mr. Wiggains filed for bankruptcy under Chapter 7 of the
Bankruptcy Code one hour after recording the Partition
Agreement. He claimed an exemption for his separate interest
in the home under Texas law, which is subject to the $155,
675 homestead exemption cap of Section 522(p) of the
Bankruptcy Code, enacted in 2005 as part of the Bankruptcy
Abuse Prevention and Consumer Protection Act
("BAPCPA") to address the so-called "mansion
loophole." After various objections by the Trustee and
certain creditors, Mr. Wiggains agreed to limit his homestead
exemption to $130, 675. Mrs. Wiggains did not separately file
family resided at the home until it was sold by the Chapter 7
Trustee for $3.4 million, netting $568, 668.41 in cash
proceeds after payment of all liens, claims, and
encumbrances. The net from the sale was further decreased by
the disbursement of $130, 675 to Mr. Wiggains pursuant to his
5, 2014, Mrs. Wiggains initiated an adversary proceeding
seeking a declaratory judgment recognizing that the Partition
Agreement gave her a one-half separate property interest in
the net proceeds from the sale. The Trustee counterclaimed to
avoid the Partition Agreement and for a declaration that the
remaining proceeds from the sale were property of the estate.
The bankruptcy court held a one-day trial on these issues on
October 21, 2014.
trial, Mr. Wiggains testified that he entered into the
Partition Agreement, upon the advice of counsel, with the
purpose of excluding his wife's community-property
interest in the homestead from his bankruptcy estate. He
understood his bankruptcy exemption was statutorily capped at
$155, 675, an amount which he correctly believed the net sale
proceeds would exceed. Although the couple discussed the
possibility that both would declare bankruptcy so that they
could receive the double homestead exemption of $311, 350,
Mr. Wiggains testified that he thought entering into the
Partition Agreement was the right thing to do as he did not
believe his wife was obligated on his business debts. Whether
she would have been liable is not an issue raised here.
April 2015 decision, the bankruptcy court held that Mr.
Wiggains's "sole actual intent in entering the
Partition Agreement was to avoid the effect of the limitation
placed on his homestead exemption by section 522(p) of the
Bankruptcy Code, " and the court equated such intent
with "gamesmanship for the purpose of placing reachable
assets outside of creditors' reach." The bankruptcy
court also stated that Mr. Wiggains's "articulated
intent to preserve for his family as much money as possible
is the same as an intent to shield as much money as possible
from creditors . . . ."
bankruptcy court declared the Partition Agreement avoidable
as a fraudulent transfer, leaving the amount of the net sale
proceeds in excess of Mr. Wiggains's exemption to be
nonexempt property of the estate. The bankruptcy court also
determined that Mrs. Wiggains had "no right or interest
in the Homestead Net Sale Proceeds by virtue of the Partition
Agreement." A principal factor in these conclusions was
that the couple executed the Partition Agreement "in the
shadow of an imminent bankruptcy filing" for no other
reason than to shield a portion of Mr. Wiggains's assets
from his creditors, which the bankruptcy court determined
"can only be reasonably interpreted as an act done with
intent to hinder and/or delay creditors."
initial decision, the bankruptcy court did not decide whether
Mrs. Wiggains might be entitled to some distribution from the
net sale proceeds under Section 363(j) of the Bankruptcy Code
on account of her separate homestead interest,
notwithstanding the avoidance of the Partition Agreement.
Notably, Section 363(j) requires the Trustee, after a sale of
certain types of property, to apportion and distribute sale
proceeds to a debtor's spouse or co-owner. 11 U.S.C.
§ 363(j). On April 20, 2015, Mrs. Wiggains filed a
motion in the underlying bankruptcy case to have compensation
paid to her from the net sale proceeds for her separate
1, 2015, which was after amending its initial opinion to make
it an interlocutory order and also to consolidate the
contested matter into the adversary proceeding, the
bankruptcy court held an evidentiary hearing on Mrs.
Wiggains's homestead compensation request. Mrs. Wiggains
was the only witness during this second hearing. She
testified that her family was renting a 6, 000-square-foot
house (at a cost of $5, 000 per month) because they did not
have funds to purchase a new homestead; that her husband was
employed by a local automobile dealership; and that the
family had exhausted all funds derived from the $130, 675
homestead exemption. Based on an expert report, which the
bankruptcy court found irrelevant, Mrs. Wiggains argued she
was entitled to as much as 95% of the balance of the net sale
bankruptcy court concluded that Mrs. Wiggains failed to carry
her burden to show entitlement to any compensation from the
sale of the homestead under Section 363(j) or any other
provision of the Bankruptcy Code. The bankruptcy court noted
that the proffered evidence was "not particularly
compelling, " and did not show that the "Homestead
had anything more than general intrinsic value to her."
On September 4, 2015, the bankruptcy court entered its final
judgment avoiding the Partition Agreement, a declaratory
judgment that the Trustee was entitled to the balance of the
net sale proceeds, and its judgment that Mrs. Wiggains was
not entitled to a distribution from the net sale proceeds
pursuant to Section 363(j).
filing a timely notice of appeal to the district court on
September 22, 2015, Mrs. Wiggains filed with this court a
request, which was joined by the Trustee, to allow a direct
appeal here under 28 U.S.C. § 158(d). We granted the
request on December 16, 2015.
review the fact findings in an order from a bankruptcy court
for clear error and its conclusions of law de novo.
Total Minatome Corp. v. Jack/Wade Drilling, Inc. (In re
Jack/Wade Drilling, Inc.), 258 F.3d 385, 387 (5th Cir.
2001). "A finding of fact is clearly erroneous only if
on the entire evidence, the court is left with the definite
and firm conviction that a mistake has been committed."
Robertson v. Dennis (In re Dennis), 330 F.3d 696,
701 (5th Cir. 2003) (quotation marks omitted). "Clear
error review is especially rigorous when we review a lower
court's assessment of trial testimony, because the trier
of fact has seen and judged the witnesses." Moore v.
CITGO Ref. & Chems. Co., 735 F.3d 309, 315 (5th Cir.
2013) (quotation marks omitted). "Where there are two
permissible views of the evidence, the factfinder's
choice between them cannot be clearly erroneous."
First Nat'l Bank LaGrange v. Martin (In re
Martin), 963 F.2d 809, 814 (5th Cir. 1992) (quotation
The Avoidance of the Partition Agreement
Wiggains contends the bankruptcy court clearly erred when it
found Mr. Wiggains acted with actual intent to hinder or
delay his creditors by executing the Partition Agreement.
Specifically, she challenges the bankruptcy court's
factual finding by arguing the court (1) failed to engage in
a contextual analysis to determine her husband's intent
in executing the Partition ...