IN THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

No. 14-40108

In the Matter of: STANLEY THAW, 

 Debtor

------------------------------

KERNELL THAW, 

 Appellant

v.

CHRISTOPHER MOSER, 

 Appellee

Appeal from the United States District Court

for the Eastern District of Texas

Before KING, GRAVES, and HIGGINSON, Circuit Judges.

HIGGINSON, Circuit Judge:

Kernell Thaw (“Kernell”), the non-debtor spouse of Stanley Thaw

(“Stanley”), claims a homestead exemption in property held jointly with 

Stanley that is subject to a forced sale in Stanley’s bankruptcy proceedings. 

She contends that the sale is a taking under the Fifth Amendment to the 

United States Constitution entitling her to just compensation. Because any 

potential property interest was acquired after the enactment of the 

United States Court of Appeals

Fifth Circuit

FILED

October 9, 2014

Lyle W. Cayce

Clerk

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No. 14-40108

Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 

(“BAPCPA”), there is no taking and we AFFIRM the lower courts.

FACTS AND PROCEEDINGS1

This appeal arises out of Dr. Stanley Thaw’s bankruptcy. Stanley 

married his wife, Kernell Thaw, in 2001. In 2002, Stanley partnered with Dr. 

Leslie Schachar to form a medical service company, Theramedics, Inc. 

(“Theramedics”), and in 2004 and 2006 Theramedics defaulted on some of its 

obligations. Theramedics dissolved soon after its defaults. Schachar 

personally paid off some of Theramedics’s debts, and Schachar obtained 

assignments of Stanley’s guarantees to pay off the debts. When Schachar 

demanded that Stanley pay off his portion, Stanley refused. Schachar sued 

Stanley and received a judgment against Stanley in November 2009.

On October 28, 2009, Stanley and Kernell purchased a home for 

$1,750,000. On November 1, 2009, Stanley and Kernell executed a Contract 

for Deed increasing the price to $2,150,000. In the following months, Stanley 

and Kernell made monthly payments on their home that were more than twice 

the contractually required amount. On June 27, 2011, Stanley and Kernell 

closed on the purchase of the home. 

On December 2, 2011, Stanley filed for Chapter 7 bankruptcy protection 

and claimed that the home was exempt from the bankruptcy estate under 11 

U.S.C. § 522(b). The Chapter 7 trustee objected to Stanley’s exemption and 

filed an adversary proceeding against Stanley and Kernell. Stanley 

subsequently conceded that his exemption was capped at $146,450 under 11 

U.S.C. § 522(p). Following a hearing, the bankruptcy court held that Stanley’s 

homestead exemption should be further reduced to $0 pursuant to 11 U.S.C. 

1 Unless otherwise noted, the facts are taken from the bankruptcy court memorandum 

opinion. Neither party challenges any of the bankruptcy court’s factual findings; indeed in 

his brief, the trustee adopts verbatim Kernell’s statement of the facts.

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§ 522(o) because Stanley acted with intent to hinder, delay, and defraud his 

creditors by “concoct[ing] an elaborate scheme to funnel non-exempt assets into 

his exempt homestead in a way that would be difficult for creditors such as 

Schacher [sic] to detect or trace.”

In the bankruptcy court proceeding, Kernell argued that she had a 

separate, vested homestead property right that was not subject to the limits of 

11 U.S.C. §§ 522(o) and (p). The bankruptcy court held that Kernell, as a nondebtor, had no “separate and distinct exempt homestead interest in the home 

. . . that would allow her to claim a homestead exemption or entitle her to 

compensation or prevent the sale of the homestead by the trustee except as set 

forth in the Bankruptcy Code.” Therefore, Kernell’s takings claim failed. 

Kernell appealed to the district court and the district court affirmed. The 

district court reasoned that Kernell had no vested property interest in the 

homestead exemption, and therefore there was no unconstitutional taking. 

Kernell appeals the district court’s order.

STANDARD OF REVIEW

“This court reviews the decision of a district court, sitting as an appellate 

court, by applying the same standards of review to the bankruptcy court's 

findings of fact and conclusions of law as applied by the district court.” In re 

Whitley, 737 F.3d 980, 985 (5th Cir. 2013) (internal citation omitted). The 

bankruptcy court’s findings of fact are reviewed under the clearly erroneous 

standard, and questions of law are reviewed de novo. Id. The facts are 

undisputed and this case presents only questions of law: whether the trustee 

can force a sale of the Thaws’ homestead, and if so, whether the sale constitutes 

a taking of Kernell’s homestead interest requiring compensation.

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DISCUSSION

I. The Bankruptcy Court’s Authority to Order a Forced Sale

Kernell has no valid objection to the property’s forced sale as ordered by 

the bankruptcy court. Section 363 of the Bankruptcy Code sets forth a 

procedure by which a trustee may sell property of the estate other than in the 

ordinary course of business. 11 U.S.C. § 363. This authorization is not limited 

to the situation where the debtor is the only party with an interest in the 

property to be sold. See In re Kim, 748 F.3d 647, 654-55 (5th Cir. 2014) (“The 

Bankruptcy Code . . . contains express authorization to sell property of the 

bankruptcy estate, notwithstanding the fact that a third party may have an 

interest in that property.”) (citing 11 U.S.C. § 363). In re Kim upheld a forced 

sale under circumstances that are nearly identical to the facts of this case: 

where a non-debtor spouse claimed a homestead interest in the property. Id.

at 655 (holding that a non-debtor’s homestead rights do not disturb the 

“bankruptcy court’s authority to order a forced sale of the [debtor and nondebtor spouse’s] residence”). There, this court expounded the “unremarkable 

proposition that a right of sale under federal law may be enforced as against a 

non-debtor spouse, in spite of the non-debtor spouse’s homestead rights.” Id.

at 656. At oral argument, Kernell’s counsel conceded the bankruptcy court’s 

authority to order a forced sale of the property but maintained that such a sale 

would constitute a taking under the Fifth Amendment for which Kernell is 

entitled to compensation.

II. Kernell Thaw’s Taking Claim

Kernell challenges the bankruptcy court’s decision—and the district 

court’s affirmance—that her homestead interest is not a vested property right

and therefore there was not a Fifth Amendment taking from a forced sale of 

the property. The trustee contends that the lower courts were correct and that, 

since her homestead interest is not a vested economic right, the Takings Clause 

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does not entitle her to compensation for the sale of the property. In deciding 

this case, neither the district court nor the bankruptcy court had the benefit of 

this court’s reasoning in In re Kim, which issued after the lower courts ruled. 

Both parties find support for their arguments in In re Kim. In support of 

Kernell’s argument, In re Kim clarified that a homestead interest may 

constitute a vested property right, and that a non-debtor spouse could be 

entitled to compensation from the sale of a property to which a homestead right 

attaches. Id. at 661 (“Homestead rights have some value to a spouse, separate 

and apart from an ownership interest in the real property on which homestead 

rights are impressed.”) (emphasis in original). However, the In re Kim court 

placed an important limitation on its holding, one which crucially 

distinguishes this case and lends support to the trustee. It noted that:

[T]his constitutional argument is likely limited to cases, like this 

one, in which the real property that constituted the homestead was 

acquired before the BAPCPA was enacted. The Supreme Court has 

indicated that when a federal statute permits a person’s property 

to become liable for the debts of another, a Takings Clause 

objection could not be successfully interposed if the property 

interest “came into being after enactment of the provision.” The 

Kims’ residence was purchased before BAPCPA was passed.

Id., 748 F.3d at 657 (emphasis added) (quoting United States v. Rodgers, 461 

U.S. 677, 697 n.24 (1983)). Unlike in In re Kim, it is undisputed that the Thaws 

purchased their property after BAPCPA was enacted in 2005.2 This distinction 

is dispositive and Kernell may not press a Takings Clause claim under Rodgers

and In re Kim.

2 BAPCPA added the Bankruptcy Code provisions—11 U.S.C. §§ 522(o) and (p)—that 

cap and eliminate the homestead interest. Pub.L. No. 109–8, §§ 308, 322, 119 Stat. 23, 81-

82, 96–97 (2005). 

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A.

In Rodgers, the Supreme Court analyzed whether § 7403 of the Tax Code 

“empowers a federal district court to order the sale of a family home in which 

a delinquent taxpayer had an interest at the time he incurred his indebtedness, 

but in which the taxpayer’s spouse, who does not owe any of that indebtedness, 

also has a separate ‘homestead’ right as defined by Texas law.” Rodgers, 461 

U.S. at 680. In analyzing this problem, the Court noted that “[i]f there were 

any Takings Clause objection to § 7403, such an objection could not be invoked 

on behalf of property interests that came into being after enactment of the 

provision. In both cases here, the homestead estates at issue came into being 

long after 1868.” Id. at 697 n.24 (internal citations omitted). Although Rodgers

addressed the Tax Code and this case addresses the Bankruptcy Code, the 

general constitutional rule is applicable to the same Texas homestead right.

Kernell does not explain, and we can think of no reason, why we should limit 

to the Tax Code the Rodgers rule limiting the takings implications of a forced 

sale to property interests that were acquired before the regulation went into 

effect.

Rodgers relied on United States v. Security Industrial Bank, 459 U.S. 70, 

81–82 (1982), which interpreted a provision of the Bankruptcy Code to be 

prospective only. In Security Industrial Bank, the Court reasoned, in part, “we 

decline to construe the Act in a manner that could in turn call upon the Court 

to resolve difficult and sensitive questions arising out of the guarantees of the 

takings clause,” id. (internal quotation marks omitted), thereby implying that 

prospective application of a bankruptcy rule would avoid a takings problem. 

See also In re Thompson, 867 F.2d 416, 422 (7th Cir. 1989) (“The conclusion 

that section 522(f), when as here it is applied prospectively, does not violate 

the takings clause of the Fifth Amendment is the premise of Security Industrial 

Bank, which construed the statute to be applicable only prospectively in order 

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to obviate a constitutional question.”); In re Bernier, 176 B.R. 976, 992 (Bankr. 

D. Conn. 1995) (noting that in Security Industrial Bank, the Court “assum[ed] 

that there was no unconstitutional taking effected by § 522(f) as to liens created 

after the effective date of the statute”). Accordingly, In re Kim’s endorsement 

of the Rodgers footnote is supported by substantial authority and applies in 

this case.

B.

While Kernell does not argue that the Rodgers rule should not apply in 

the bankruptcy area, she contends that Rodgers does not extend so far as to 

permit an existing statutory regime that provides for the “gratuitous 

confiscation” of property. Rodgers, 461 U.S. at 697 (“Admittedly, if § 7403 

allowed for the gratuitous confiscation of one’s property interests in order to 

satisfy another person’s tax indebtedness, such a provision might pose 

significant difficulties under the Due Process Clause of the Fifth 

Amendment.”). First, Rodgers said only that a gratuitous confiscation might

pose a Takings Clause problem, not that it would always constitute a taking. 

Second, Kernell does not argue how a forced sale in this case would be a 

“gratuitous confiscation.” She presents a hypothetical in which a property in 

which a delinquent taxpayer has a one percent interest is seized in order to 

pay that taxpayer’s liability. Kernell avers that this “seizure” of the other 99-

percent owner’s interest would clearly be an unconstitutional taking even if 

the property was purchased after the enactment of the statute authorizing 

such a sale. We disagree. In Rodgers, there was no takings problem because 

the relevant Tax Code provision provided for compensation “by requiring that 

the court distribute the proceeds of the sale according to the findings of the 

court in respect to the interests of the parties and of the United States.” Id. at 

697 (internal quotation marks and citations omitted). These provisions would 

similarly operate in Kernell’s hypothetical to afford the non-delinquent owner 

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compensation for the seizure. Similarly, here, the Bankruptcy Code is 

designed to minimize takings concerns. Section 363, the provision under which 

the property is to be sold, contains protection for non-debtor spouses. Like the 

Tax Code provision that the Rodgers court found militated against a 

“gratuitous confiscation,” Section 363(j) directs the trustee to apportion and 

distribute the proceeds of the sale to the non-debtor spouse and to the estate. 

11 U.S.C. § 363(j). In addition, Section 363(i) gives non-debtor spouses a right 

of first refusal to purchase the property. 11 U.S.C. § 363(i). These safeguards 

show that a forced sale here will not be a gratuitous confiscation.

Kernell also contends that the fact that BAPCPA existed at the time the 

Thaws acquired the property should be just one factor in determining whether 

a taking has occurred. According to Kernell, Palazzolo v. Rhode Island, 533 

U.S. 606, 626 (2001), retreated from the rule announced in Rodgers. In 

Palazzolo, the Court rejected the argument that “by prospective legislation the 

State can shape and define property rights and reasonable investment-backed 

expectations, and subsequent owners cannot claim any injury from lost value,”

and cautioned that “[w]ere we to accept [an absolute rule], the postenactment 

transfer of title would absolve the State of its obligation to defend any action 

restricting land sue, no matter how extreme or unreasonable.” Id. at 627. The 

Court recognized that “[t]he Takings Clause . . . in certain circumstances allows 

a landowner to assert that a particular exercise of the State’s regulatory power 

is so unreasonable or onerous as to compel compensation.” Id. 

Palazzolo’s narrow exception has no application here. Kernell does not 

connect the “certain circumstances” identified in Palazzolo to the Bankruptcy 

Code provisions at issue here. She does not argue that the sale of her interest 

in the property is “so unreasonable or onerous as to compel compensation,” id., 

so the trustee’s actions do not fall within any limit imposed by Palazzolo. Just 

as the Bankruptcy Code protects a non-debtor from gratuitous confiscation, it

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makes the sale of the property not “so unreasonable or onerous as to compel 

compensation.” Moreover, the forced sale will not disturb Kernell’s 

investment-backed expectations. See Palazzolo, 533 U.S. at 617 (considering, 

in determining whether a taking occurred, “the extent to which the regulation 

interferes with reasonable investment-backed expectations”). Since BAPCPA 

was in effect before the Thaws purchased the property, and because the Thaws 

purchased the property after they had knowledge of the judgment against

Stanley, Kernell was on constructive notice of how the Bankruptcy Code would 

operate in the event of Stanley’s bankruptcy. In sum, the sale of the property 

is neither a “gratuitous confiscation” nor “so unreasonable or onerous as to 

compel compensation.”

CONCLUSION

For the foregoing reasons, we hold that the forced sale of the property by 

operation of § 363 does not constitute a taking of Kernell Thaw’s homestead 

interest. The Thaws acquired the property after the enactment of BAPCPA, 

there is no “gratuitous confiscation,” and the sale is not “so unreasonable or 

onerous as to compel compensation.” Accordingly, § 363 governs the 

distribution, if any, due to Kernell.3 Since we have the benefit of considering 

In re Kim, our reasoning is different from the lower courts, but we may affirm 

on any ground supported by the record. See Moncrief Oil Int’l. Inc. v. OAO 

Gazprom, 481 F.3d 309, 311 (5th Cir. 2007). The district court is AFFIRMED.

3 We will not issue an advisory opinion on how Section 363 should apply to apportion 

any sale proceeds in this case.

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