hours before beginning i wanted to express gratitude for being able to argue before this court i've had been blessed to be able to do it on number of occasions and every time it's a memorable experience and it's definitely an honor to be before th court and i also want to do something a little bit of odd which is i want to express gratitude for the judge that ruled against me in the bankruptcy court and that's important to me and i want this court to recognize that although i disagree with her ruling in this case i have a very high regard for judge jernigan we are blessed in dallas to have three outstanding bankruptcy judges i've been practicing bankruptcy law there for thirty four years and we have a an amazing group of three judges and so i i want to express gratitude to judge jernigan because although my loss in front of her which isn't the first time and won't be the last time she is a very caring very intelligent judge to really pays attention to  thorough opinion in this case very thorough and informed and it's very like her to want to reach the the right decision and so i did want to express that and another thing that i'd like to do is before getting into what is very can be a very hyper technical analysis under these cases and under the statute i want to go up forty thousand feet for just a minute and and talk about in my experience the three things that i see in fraudulent transfer cases just to sort of set the table for what i think we're dealing with with respect to transfer cases the three things that i see in fraudulent transfer cases is first of all in this is in an actual fraud case you see fraud and if you go back to the the purpose of these fraudulent stat transfer statutes going back to the elizabeth an era sixteen hundreds when these statutes came about these were statutes that were designed to to remove situations where a debt who didn't have enough money to pay creditors had engaged in some fraudulent conduct so so fraud is definitely something we see in these cases the second thing that we see your honour's is in this is in our construct of fraud cases we see a lack of reasonably equivalent value or in other words we see a situation where a debtor has transferred assets and has not got in the correct amount in return so in other  words somebody that has a number of creditors has an asset that's worth a thousand dollars and transfers it for ten dollars and in that situation we have a lack of reasonably public value the third thing that we see in these cases and this is true in both actual and constructive fraud cases we see an asset that is transferred that is not otherwise exempt from creditors so in other words we see an asset being transferred that is available for creditors from which creditors can be paid now applying those three things to this case because i think this case provides an unusual set of facts a unique set of facts and one of the reasons we have an unusual and unique set of facts in this case is because those three three things that are in all fraudulent transfer cases are not none of those three things we have in this case in this case we have a stipulation from the trustee that was made in open court cited to in our prefer in bankruptcy judge clearly picked up on this we have a stipulation that there was no fraud in this case no fraudulent intent in this case no question about that but we have a stipulation from the trustee that was made in open court again no question about it  cited in our brief with the exact language there was a stipulation that reasonably equivalent value was given for the transaction in question and third your honors we have this is a really unique and unusual situation we have an asset that was transferred that's alleged to be a fraudulent transfer with no fraud that was an exempt asset and when you look at the jurisprudence of fraudulent transfer law throughout the last four hundred years what we have being transferred is assets that are available for creditors in this case there's no question that the transaction that we're talking about is the partitioning of an exempt asset so the moment before the partition you have each person each spouse having and divided one half interest in community property in an exempt asset their homestead and the moment after the transaction you have these same two spouses say having the same one half undivided interest but instead of in community property it's in separate property but what doesn't changed pre partition vs post partition is that that asset is an exempt as it before and it's an exempt asset afterwards also you presented us w contract it is no doubt healthfulness understanding but the determination by the bankruptcy court was that the effect of this and the intent of this as well as the effect was a hinder or delay not to fraud which is just one of the three options and or delay creditors in the definition in some case law is acting improperly to make it more difficult for creditor to collect it then badges of fraud or whatever we're not dealing with that it seems to me that this is really a matter of definition that we're dealing with here in the two if you're trying to walk us through no doubt in the definition is that by partitioning this and trying to get half of the equity up side of the bankruptcy of state  if that in fact was improper will go to backwards that was intended to keep creditors from accessing that much of the equity and to label it hinder or delay it seems to me is a fair characterization of what happened so i mean at that level it's one thing to say that you have the legal right you kind of a legal right to do what you do at your advice and on people's advice and the husband as well but something else to say that even though is a legal right to partition homestead when it's done at this time an hour before the bankruptcy of that's timing is correct it does seem to me to have the effect of hindering delay can you leave sort of your contract and help me with the case all that is helpful to you to say this is the wrong way to define the for a gender or delay yes and it's a great question your honor and i and i didn't mean to give short shrift to the actual definition of fraudulent transfer and clearly it's important that the the language of the statute the plain meaning of the language of the statute is written in the disjunctive rather than in the conjunctive so hinder and delay seem to be enough  i will tell the court there is case law that in fact the eighth circuit court of appeals and this is this case it's the addison case cited in and it's in judge jernigan recognizes this in her opinion that she wrote the first opinion which i call the fraudulent transfer opinion as opposed to the second opinion which i called the distribution opinion but in the fraudulent transfer opinion judge jernigan recognizes that there is a split of authority there are cases that hold that you have to have fraud even though the statute is written the way that it is to do to your honor's point if i believe that if this court rules to affirm judge here again that would be a split in the circuits because the eighth circuit in that addison case has held that you have that hindered delay is not enough without fraud i do however recognize haven't raised that as a separate issue having i'm sorry if you raise that as a separate issue in this case we i'm not sure we drill down to that detail but we have raised the issue that there should not be hinder and delay should not be enough without fraud we have raised that issue so i think and i don't think that we cited specifically to the addison case but that is in judge jurgens opinion and we we disagree with that analysis and i want to because your your times  bankruptcy trial where you the lawyer for the for the wiggins when they did this partition agreement shortly before chapter seven yes your honor i was and the backup to judge is one that raise that issue not you and  so i was surprised that the bankruptcy judge allowed a post trial motion to reconsider where you raise the issue she had raised to a spontaneity and she dealt with it but in dealing with that when did you raise this point that she satisfied subpart three sixty three h about the unique circumstances of a sale i didn't see it until your reply did you bring this up before  wiggins was entitle to a distribution and frankly from my standpoint your honor i don't think it matters whether it's under three sixty three j or three sixty three which requires out of her protection or if it's under section one  which basically says that the bankruptcy code has to effectuate the basically the provisions of the law that the reason that i don't think it really matters your honor is that i think ms wiggins and as a part of my argument i was going to show the court why but i think she hasn't entitle me to these homestead proceeds that doesn't even necessarily need a bankruptcy code section to allow her to put out for example a secured creditor obviously is entitle to a secured creditors secured portion of the proceeds of a property that sold in bankruptcy there's no bankruptcy because section three sixty eight three h j and k do not deal with or say that a secured creditor gets to have their proceeds take it out before the money goes as yours but that is the law taxing authorities get to have their money taken out on at warm property taxes before creditors there's nothing in three sixty three h or j or anything that gives that entitlement it's it is axiomatic that if a party has an interest in property they get to get that that property out so i am not and i'm not saying you shouldn't be but i'm not so much hung up on which section of the bankruptcy code it is because to me if she has an in title meant to those those that part of that asset like a circu the the holding was that no proceeds would go to the spouse but it was because no evidence was put on as to what she was entitled to now since i lost that case to i i learned from that was that we had to put on evidence in this case as to how much of the distribution the non filing spouse should get which is why we hired an expert witness who is an actuary and that expert witness who is an actuary did it exactly the way this court has required it to be in at best it's when you finish looking at what amount a filing creditor is entitled two hundred fifty thousand dollars reduced in this case which you're looking at is whether the effect is to result in a said which is that there has to be a gratuitous confiscation which means that the spouse was not compensated and the way judge jernigan got around that in this opinion is she said well we don't know that she that mrs wiggins was not compensated by mr wiggins receipt of  hundred thirty thousand dollars but we do know that because what we know is that each spouse in a bankruptcy case under section five twenty two is entirely two separate awards or separate receipt  of exempt property so if she had filed bankruptcy she would have been entitled to another fifty hundred fifty five thousand dollars there would have been two entitlements and so what we know from that is that the entire movement that mr wiggins received was his separate hundred fifty five thousand dollars and that if she had filed bankruptcy she would have received one hundred fifty five thousand it's interesting your honor because the bankruptcy code is not given in title meant to one hundred fifty five thousand dollars it caps the state law in title meant two hundred fifty five thousand dollars and i think the bankruptcy judge with due respect got this wrong and she says four times in her opinion that mrs wakin should have filed bankruptcy in fact at one point in her opinion she says she's put it in bold in italics that mrs wiggins should have filed bankruptcy and she would have been entitle to one hundred fifty five thousand dollars and you know as i respectfully argue that that's that's not a correct view of the law the  entitle ment doesn't come from the bankruptcy code the entitlement comes from the state texas constitution says that each spouse has a constitutional right to the homestead property that right which is unlimited under texas law is capped by the bankruptcy code the bankruptcy code doesn't grant the one fifty five the bankruptcy code caps the unlimited state exemption to one hundred fifty five thousand or so in other words if if the wiggins had filed bankruptcy in new mexico they wouldn't have got one hundred fifty five thousand dollars they would have gotten thirty thousand because that's all the state gives so to me in thought when it says that if you don't get anything there's a gratuitous confiscation i think that's the exact case we have here we have a gratuitous confiscation because mrs wiggins got nothing mr wiggins got his hundred fifty five thousand dollars essentially and she's not entitle to his portion she would have if she had filed bankruptcy she would have gotten her own portion and so i believe she has her own in title meant to the two and it's not kept in bankruptcy because she didn't file bankruptcy even for the  simply this did the debtor in entering into the partition agreement intend to hinder or delay his creditors by entering into that agreement eight circuit and on facts and situations similar to this say that all three of those elements must be satisfied or at least the fraud must always be present you know i'll confess to say i don't know what  whether this would give rise to a circuit split but from the standpoint of of how this court is supposed to look at the bankruptcy statute it construed i think there's no question that written in this in the disjunctive a fraud in transfer action can be asked him at trial and this is quoted on page ten of my brief i asked him a trial and isn't it true mr wiggins that one of the reasons why you felt it was the right thing to do to enter into the marital property agreement is your wife was not obligated on your business debts and he didn't feel that her interest in the community estate should be available for the payment of your creditors claims yes it was his answer i went out and asked so the marital property agreement then was entered into with the purpose and intent of keeping your creditors from being paid on what you believe to be your wife's interest in the property his answer i guess it just depends on what side of the coin you're on but from your for me from but yeah from your perspective so from the standpoint of the interest of creditors and from the standpoint of what this trustee is supposed to protect in terms of transfers made by a debtor this debtor intended to prevent his creditors from getting paid out of what he thought get what he had she said well i'm out of here i want to i don't want my half of the house being used to pay your debts which for which i have no responsibility and so from just an equitable or a fairness point  as counsel said looking at it from forty thousand feet you got to say well how that hindering of delaying she just get her she just taken her money and run before all the creditors descend on her husband and you know i think the answer that is what what the laws provide from the standpoint of what the bankruptcy code says the debtor chose to follow bankruptcy case the bankruptcy law says when he files a bankruptcy case the entire community estate if it's subject to the joint i know that but he divided the property before he file for bankruptcy sure he did but he did so with the intent of preventing his creditors from being paid and if you know the fact sheet she did so because she didn't want her money being used for creditors for whatever reasons her husband  i understand but that but the issue is the debtors intent and the debtors intent here was clearly to prevent his brothers from me so there may well be at the end of the day for this court in considering this and that's all that's required under five forty eight a one a so we've established the basis for avoidance so what is what is avoiding this partition agreement mean it means that the entire property that the partition is a nobody and that the  homestead property is property of the bankruptcy estate and so the bankruptcy court found that meant that the property subject to a limited exemption claimed by the debtor and so the bankruptcy court authorized to sell the property then we come to the question during the course of the first trial it wasn't presented in terms of any pleadings there was a separate motion filed as i recall by debtors counsel to address that issue and i think from a procedural standpoint judge jury can felt it was simply easier to bring all that into a single day and i suppose part of it was the request to by the parties as i think about it to bring all of that into one adversary procedure so we did have two appeals going one from the avoidance action and one from the issue of the retirement to the proces on the on some basis this wigan's is entitle some of the proceeds from the sale of this this homestead property that's not the way the bankruptcy code works if there is no provision in the code for any kind of relief or payment to that she's not entitled to compensation this court left open the question in camis whether or not three sixty three j in the circumstance of the sale of a homestead property provided for any kind of compensation to the non filing spouse it's clear to me again in a in a careful reading of three sixty three j a that there is no provision in that section for compensation to a non filing spouse where the interest that at issue is a community property interest it is very clear and the the hendra case that the side of the brief i think provides a very good explanation of how three sixty three j operates and the court in hendrick explained that that three sixty three j and f only apply in the case where there's an interest in property by an entity other than the estate ms wiggins by virtue of the fact that the court had nullified the partition agreement had no interest in the homestead property other than this prophylactic right that exist under texas law to prevent a forced sale of the sale was not a forced sale this sale was consensual sale that had been initiated actually by the debtors when they found the first motion the bankruptcy court to sell the house that they were seeking to sell the house a month before they file for bankruptcy  they had a they had a contract pending and they they then filed with the contract that they'd entered into pre partition they filed a motion to sell the trustee took exception that saying that the homestead property is still property a state  so will thank your much will filed the motion to sell the property was sold by consent of the parties and then there was the issue of course of what what the parties were entitled to a state versus the debtor in the debtors spouse with respect to community interests such as this when that property is sold there is a recognized right of first refusal under three sixty three high but three sixty three j speaks to tendencies or joint tenants this is not a joint tenet or co tenancy interest despite councils arguments to the contrary where there's an odd statement perhaps under your argument in kim  put in that opinion seems to be suggesting my next parent texas law who wrote the opinion that there may be some aspects of coton and see between spouses in the homestead situation how do you read what's going on  three their last year versus first huntsville properties and sayers vs pilot both of the texas supreme court decisions and in both of those instances and the reason why the fisher king cam was referring to co tenants in the context of a homestead property is that at one point it was homes that property between husband or wife but it at the point in time when the property interest or at issue in the in the actions that were filed there was no longer an interest owned by husband and wife in wife who held a mortgage interest in the in the debtor's homestead interest so the so in other words we're talking about what type of interest exists after divorce when a husband or wife partition r separate the buy their interest by virtue of that divorce into these two pieces in that context yeah it's a co tennessee it's not a homestead because they're no longer married similarly in the sarah's case the co tenancy was between the wife as a homestead claimant and the executor under the husband's will again at one point it was a homestead property but at the point time when the when these property interest rates were being considered court there was no longer a husband wife interest being held to the point so i did read our case well to say that this still is an unsettled issue that maybe we need to settle in this case about what the non falling spouse isn't tired of too oh what you finished looking at what the falling spouse has gotten is the exemption so and i'm an outer ring work with that i'm in and i depart every time this case this issue comes to us well this is a pretty good case it seems to me you certainly presented argued in the district court with be the case law and pronto i think this is an excellent case for this court to nail down finally that there is no entitle me to any compensation in this circumstance simply because the homestead interest at issue has based upon translates into monetary value simply because one point had the right to keep this house from being sold or judges or any corner case for the non donor because it wasn't in force now i think this is a much harder case for the for the because it was not a for sale because in that circumstance you could argue being deprived of the right to occupy the homestead does have a value that can be translated and i think this this court has suggested would indeed and i think maybe the rogers case the supreme court's decision as well would indicate that a forced sale of a homestead where the where the the spouse who is who does not have the debt or is not causing that for sale to occur should be compensated for being booted out of her home but that's that wasn't the case here in this case the debtors chose to sell the property and they chose to sell it and they chose to enter a partition agreement to to attempt to maximize the recovery they would obtain from that sale even with the debtor filing bankruptcy but saying that there is some value to the interest does not equate to there being an economic value that interest by also filing a bankruptcy case that's what that's the how the law protects the non debtor spouse go ahead and file and get your your protection as well for your exemption and i think it is totally fair and reasonable in these circumstances that for this court to find compensation that you're entitled to as the compensation you receive with with respect to your community property interest in what your husband claimed as example if you want to know anything more than that that you could have filed to and get your own exemption and that should be was an effort to validate to protect the interest the spouse has and and the homestead and in some way does the partition it is irrelevant your honor but it certainly had a bearing on entering into the partition agreement because as as the record clearly reflects the appellant this is wakens new based upon the bankruptcy advice they had received they knew well first of all they knew that there was substantial equity in their home they knew that they wanted to sell it and that they would realize something the order of five or six hundred thousand dollars in the sale of a home they also knew that by virtue of that the second thing they knew was that mr wiggins was in deep financial distress and he was intending to file bankruptcy so they consulted with a bankruptcy attorney by virtue of that they also knew that under the bankruptcy laws because they had acquired this home within the twelve hundred fifteen days that that is addressed in section five twenty two p there homestead exemption his homestead exemption was going to be limited to the statutory maximum which was one hundred fifty seven thousand dollars that meant that was the most that they could hope to realize on the sale of that home if the house remained community property because that community asset was clearly in the property the estate so they on with instruction vice and counsel came up with the idea of partitioning the property to keep out the wife's interest in the homestead property keep it out of the bankruptcy state let her keep those proceeds so five twenty two page does come into play from that standpoint because they knew the consequence of five twenty two people when they were considering what options they had to protect that that interest but see that's that comes back to my question to you where you said we look only to the debtors intent on this partition but but the wife was also involved in this she wanted her money  his wife and i to get her her money out of there before you know the creditors descended i'm not in this if i may who was a simple as you posit that we were going into the debtors intent we would have needed a seventy or some eighty page opinion under the that the statute provides for and only provides for what is the intent of the debtor that's what the statute says it doesn't it doesn't state the actual  intent of the debtor and the transferee it's the intent of the debtor and the intent of the debtor here was clearly to prevent the payment his credit claims the fact that he had a lot of a purpose in doing so or a totally legitimate purpose of doing so outside of bankruptcy is not the issue the issue is did he in entering into that agreement intend to prevent his credit from getting paid he clearly did therefore as a matter of statutory interpretation this court must find that the the partition agreement is subject to avoidan saying he didn't care who got the money even the wife or the credit because it didn't matter to him you know and i think that if in that circumstances that would be it that would be a different kettle of fish because there would not then be the evidence of an intent to prevent his creditors from getting paid but his ever his testimony was i did this i entered into this agreement with the purpose and intent of preventing my creditors from getting paid out of what i thought was assets  which should be protected namely my wife's interest in the homestead and this this partition agreement does it say anything about and i know it doesn't but just for our record and there's a saying anything about that and whatever value my wife obtains as a result of i want to address a couple of points made by mr quist on the hinder and delay issue that the point that i wanted to highlight very quickly is that this analysis of hinder and delay has never to my knowledge been applied to just to a case where an exempt asset is true and i think that's a really important distinction and issue in this case there are other cases that this court has ruled on on hinder and delay for example the boyer case from a number of years ago which dealt with bankruptcy planning and that case dealt not with transfer of exempt assets to exempt assets or recorders ation of exempt assets to exempt assets which we have in this case but instead in the boyer case it was a conversion of nonexempt assets that creditors would have been entitled to to exempt assets the creditors are not entitled to the in the boyer case for example the debtor who was an anesthesiologist had taken money that he had and had transferred it into he built a green house it is home to make it part of the real estate that would be exempt he took some of the cash that he had and he went on a trip with his family to hawaii and even in that case this court found that there were no violations that would had now the court looked at it on a hinder and delay analysis but this court even under some pretty egregious facts i think in that case found that there was no issue with respect to the fraudulent transfer and that's the case where this court came up with which is very colloquial but really helps the analysis it's the pigs get that hogs get slaughtered analysis comes directly from that boy or case and and my point is on hindering  even in the cases like boyer where there are nonexempt assets being transferred into exempt assets we're still using the discretion of the pigs get fat how it's get slaughtered analysis in this case i think what judge journey begin did with the hinder delay analysis is more akin to a strict liability type of analysis than a discretionary analysis now the word she says that this transaction impeded or obstructed creditors and therefore it's tender in the way and i think you could say that of so many things in every bankruptcy case across a desert didn't pay a creditor a check bounced the debtor filing bankruptcy those are all things that obstruct and impede creditors but they don't have the impact of losing a discharge or having a fraudulent transfer in houses i really think this analysis is more akin to a strict liability offense and this court has said that's not the way we look at these things we look at it on the on a discretionary standpoint but i do want to highlight because they think it's really important in this case that what was partitioned is an exempt asset before the partition to an exempt asset after the petition i don't think there's anybody in this room that would dispute that the debtors could have gifted that house an hour before bankruptcy or a week before bankruptcy to their children or to the red cross and had no consequence to it at all because it was their exempt asset creditors were not entitle to that asset and they could do with that asset whatever they wanted to the fact that they partitioned it into from community property to separate property shouldn't be any different than if they had given that property away an hour before bankruptcy it was theirs creditors were not entitle to and it should have a different analysis i want to go into one other point that was raised in and that is the the texas cases that are kind of cited by kim and i and mr quest talked about that quite a bit and i wanted to give the court quickly what i view to be because i only have a minute left of what i pieced together from these seven cases that i think are important i'm going to do this very quickly i think we get from the case benchmark versus crowder which is the texas supreme court case in the materials that this homestead right is a separate right of each spouse i think we get from the hague and versus pendleton texas supreme court case the fact that this right is prophylactic protective right not a property right i think we get from the roger that the united states versus rogers that this situation is analogous to a life estate and that analogy has never been broken in the in the case law it was followed by this court in harris and i think harris is the most important and the most on point case before this court in this analysis that the harris case in that case we looked at this homestead right as a life  state we valued it using the treasury regs and we found that it had a particular type of a value and then we from kim we learned that that life estate analogy is as applicable in the tax analysis which was harrison rogers as it is in a bankruptcy setting i think we put on the right evidence there's no contra contravening evidence as to the value and i think and i've been asked if i may have just thirty seconds more  just i'm asking that this case be reversed and rendered not be mandated and if it's rendered on the basis of fraudulent transfer being reversed that she'd be awarded two hundred eighty four thousand dollars which would have been her half under the partition if it had been avoided and i'm going to ask that if it is reversed on the basis of the distribution issue that she received the amount that is she's entitled to under the treasury regulation analysis as put forth by our